NEW YORK BAGEL ENTERPRISES INC, S-1/A, 1996-07-26

NEW YORK BAGEL ENTERPRISES INC
S-1/A, 1996-07-26
EATING PLACES

Previous: GOLDEN BEAR GOLF INC, 8-A12G, 1996-07-26

Next: NEW YORK BAGEL ENTERPRISES INC, 8-A12G, 1996-07-26

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996

REGISTRATION NO. 333-05785

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1
TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

NEW YORK BAGEL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
KANSAS 5812 73-1369185
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>

300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
316-267-7373
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------

ROBERT J. GERESI
CHIEF EXECUTIVE OFFICER
NEW YORK BAGEL ENTERPRISES, INC.
300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
316-267-7373
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------

COPIES OF COMMUNICATION TO:

<TABLE>
<S> <C>
GREGORY B. KLENDA, ESQ. RICHARD F. DAHLSON, ESQ.
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C. JACKSON & WALKER, L.L.P.
1600 EPIC CENTER 901 MAIN STREET, SUITE 6000
301 NORTH MAIN STREET DALLAS, TEXAS 75202-3797
WICHITA, KANSAS 67202-4888 214-953-6000
316-267-0331
</TABLE>

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

<TABLE>
<CAPTION>
ITEM NUMBER OF FORM S-1 AND TITLE OF ITEM PROSPECTUS CAPTION
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus...................... Outside Front Cover Page

2. Inside Front and Outside Back Cover Pages of
Prospectus.......................................... Inside Front Cover Page; Additional Information;
Outside Back Cover Page

3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors

4. Use of Proceeds...................................... Prospectus Summary; Risk Factors; S Corporation
Distributions; Use of Proceeds; Management's
Discussion and Analysis of Financial Condition and
Results of Operation

5. Determination of Offering Price...................... Outside Front Cover Page; Risk Factors; Underwriting

6. Dilution............................................. Risk Factors; Dilution

7. Selling Security Holders............................. Outside Front Cover Page; Prospectus Summary; Risk
Factors; Principal and Selling Stockholders;
Underwriting

8. Plan of Distribution................................. Outside Front Cover Page; Underwriting

9. Description of Securities to Be Registered........... Description of Capital Stock

10. Interests of Named Experts and Counsel............... Legal Matters; Experts

11. Information with Respect to the Registrant........... Prospectus Summary; Risk Factors; S Corporation
Distributions; Dividend Policy; Use of Proceeds;
Dilution; Capitalization; Selected Combined
Financial Data; Management's Discussion and Analysis
of Financial Condition and Results of Operations;
Business; Management; Principal and Selling
Stockholders; Certain Transactions; Description of
Capital Stock; Shares Eligible for Future Sale;
Combined Financial Statements

12. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... *
</TABLE>

- ------------------------
* Item is inapplicable or the answer thereto is in the negative and is omitted
from the Prospectus.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>

SUBJECT TO COMPLETION, DATED JULY 26, 1996

2,000,000 SHARES

[LOGO]
NEW YORK BAGEL ENTERPRISES, INC.
COMMON STOCK

Of the 2,000,000 shares of Common Stock offered hereby, 1,800,000 shares are
being sold by New York Bagel Enterprises, Inc. (the "Company") and 200,000
shares are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any proceeds from the sale of Common Stock by the Selling Stockholders.

Prior to this offering, there has been no public market for the Common
Stock. It is currently anticipated that the initial public offering price will
be between $10.00 and $12.00 per share. For information relating to the factors
to be considered in determining the initial public offering price, see
"Underwriting." The Common Stock has been approved for listing on the Nasdaq
National Market under the symbol "NYBE," subject to notice of issuance.

SEE "RISK FACTORS" APPEARING ON PAGES 7 TO 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE UNDERWRITING PROCEEDS TO SELLING
TO PUBLIC DISCOUNT COMPANY(1) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total (2).................... $ $ $ $
</TABLE>

(1) Before deducting estimated expenses of this offering of $700,000, payable by
the Company.

(2) The Company and the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to an additional 300,000 shares of Common
Stock, solely to cover over-allotments, if any. See "Principal and Selling
Stockholders" and "Underwriting." If the Underwriters exercise this option
in full, the total Price to Public, Underwriting Discount, Proceeds to
Company and Proceeds to Selling Stockholders will be $ , $ ,
$ and $ , respectively.

------------------------

The shares of Common Stock are offered severally by the Underwriters named
herein subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that certificates
representing the shares will be ready for delivery at the offices of Rauscher
Pierce Refsnes, Inc., Dallas, Texas, on or about , 1996.

RAUSCHER PIERCE REFSNES, INC. J.C. BRADFORD & CO.

------------------

THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>

[Photograph depicting front facade and side of building, and outside seating of
a Company restaurant.]

[Photograph depicting a selection of the Company's bagel delicatessen
sandwiches, drinks and other food items.]

[Photograph depicting the interior with table and booth seating of a Company
restaurant.]

[Photograph depicting products with Company logo.]

[United States map designating cities with Company-owned restaurants, franchised
restaurants, Company-owned restaurants under development and franchised
restaurants under development.]

[Photograph depicting product sack with Company logo and a selection of bagels
and cream cheeses.]

[Photograph depicting the interior front order counter with menu board and bagel
display case of a Company restaurant.]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY INFORMATION IS QUALIFIED IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION AND COMBINED FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION CONTAINED IN THIS PROSPECTUS (I) REFLECTS A 1.4-FOR-1 STOCK SPLIT
EFFECTED ON JUNE 4, 1996, (II) REFLECTS THE REORGANIZATION AND ACQUISITIONS AS
DESCRIBED HEREIN, (III) REFLECTS THE CONVERSION ON A ONE-FOR-ONE BASIS OF THE
CLASS B COMMON STOCK INTO CLASS A COMMON STOCK AND THE RECLASSIFICATION OF THE
CLASS A COMMON STOCK INTO COMMON STOCK, AND (IV) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."

THE COMPANY

The Company owns and franchises 50 quick-service New York Bagel restaurants
in 16 states that serve generous portions of fresh, high quality food with fast,
friendly service at an attractive price-value relationship. New York Bagel
restaurants provide a selection of up to 20 varieties of bagels that are made
from scratch, boiled and baked throughout the day in the traditional "New York
style." Breakfast menu items include a variety of bagels and custom-blended
cream cheeses, breakfast bagel sandwiches, gourmet coffees, muffins and
croissants. Lunch and dinner items include an assortment of bagel delicatessen
sandwiches, prepared salads, cookies and soft drinks. The restaurants are
generally open Monday through Saturday from 6:30 a.m. to 8:00 p.m. and on Sunday
from 8:00 a.m. to 5:00 p.m. Management believes that Company-owned restaurants
typically generate approximately 40% of their sales before 11:00 a.m., with an
average ticket of approximately $3.00 during such period and $4.00 thereafter.
Time studies performed on a periodic basis by the Company show that, on average,
breakfast customers are served within three minutes of placing their order and
lunch and dinner customers are served within five minutes.

The Company opened its first restaurant in 1986 and has grown by expanding
its base of Company-owned restaurants and selectively adding franchisees. The
Company has developed 18 of its 20 Company-owned restaurants in Oklahoma,
Kansas, Tennessee and Texas. In addition to developing new restaurants, the
Company acquired two bagel restaurants in December 1995, one of which was a
franchised New York Bagel restaurant. The Company commenced franchising the New
York Bagel concept in 1993 and currently has 20 franchisees operating 30
restaurants in 15 states. The Company intends to continue expanding its concept
and contemplates having 28 to 30 Company-owned and 45 to 50 franchised
restaurants in operation by the end of 1996 and 45 to 50 Company-owned and 70 to
80 franchised restaurants by the end of 1997.

The Company believes that consumption of bagels has increased in recent
years as consumers have discovered that bagels are a healthier, lower fat
alternative to other quick-service foods and are a suitable substitute for
sandwich breads. Management believes that the market for retail bagel
restaurants is fragmented and underserved, and that the Company can capitalize
on the demand for fresh bagels by expanding the New York Bagel concept in
targeted markets.

The Company presently targets mid-sized and smaller metropolitan markets, as
management believes these markets typically contain fewer competing bagel
restaurants and more favorable lease and labor environments than larger
metropolitan markets. In each of its targeted markets, the Company seeks to
establish a strong market presence by employing a multiple store strategy
involving a bakery restaurant which produces bagels for itself and for one or
more nearby satellite restaurants. In addition to opening new restaurants, the
Company intends to pursue selective acquisitions of local and regional bagel
operations with an established market presence. By entering underserved markets
and opening multiple restaurants, the Company hopes to maximize market share and
establish brand awareness. The Company and its franchisees have implemented this
bakery/satellite restaurant combination 15 times.

3
<PAGE>

By employing a multiple store strategy, the Company focuses not only on
generating attractive unit level economics, but also on the economic returns of
each target market. The Company's approach to opening new restaurants has been
to minimize its required investment by leasing substantially all of its
locations. The Company believes that bakery restaurants can be opened for an
initial investment, including leasehold improvements, furniture, fixtures,
equipment, initial working capital and pre-opening expenses, of approximately
$250,000, with satellite restaurants requiring approximately $150,000. By
averaging these initial investment amounts within markets, the Company believes
it achieves attractive returns on investment. During 1995 and the period ended
June 30, 1996, average sales per Company-owned restaurant opened throughout each
period were $559,000 and $293,000, respectively. During 1995 and the period
ended June 30, 1996, the Company's restaurant level cash flow margin was 17.1%
and 18.9%, respectively.

The Company believes that the location, layout and design of its restaurants
contribute to the success of its operations. The Company's restaurants are
typically located in strip shopping centers, free-standing buildings and
downtown business districts that provide visibility, curb appeal and
accessibility. A variety of factors are considered in selecting sites for the
Company's restaurants, including population density, traffic patterns, area
demographics and competition. The Company's restaurants are configured to
facilitate a smooth flow of dine-in and carry-out traffic while retaining a
casual cafe atmosphere. The Company's prototypical unit is decorated in rich
colors and dark woods and contains a mixture of booth, table and barstool
seating and, where available, outdoor seating. Exposed ceilings with drop
lighting and a combination of tile and carpeted flooring are used to enhance its
comfortable ambiance. Walls are covered with black and white photographs
depicting classic New York scenes. The flexibility of its restaurant design and
layout allow its restaurants to be configured to fit a wide variety of
locations, thereby increasing the number of suitable sites.

Management believes that comprehensive training is essential to the
efficiency and consistency of its operations. Accordingly, the Company conducts
an extensive 90-day training program for its restaurant managers and franchisees
that is comprised of approximately ten days of classroom instruction on
administration, record keeping and inventory control and approximately 80 days
of on-site instruction on baking and food preparation at the Company's training
facility in Oklahoma City, Oklahoma. In addition, the Company provides a team
for on-site assistance during the initial ten days of operation at each
Company-owned restaurant and at a franchisee's initial franchised restaurant.

The Company's executive offices are located at 300 I.M.A. Plaza, 250 North
Water Street, Wichita, Kansas 67202-1213, and its telephone number is (316)
267-7373.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company.............. 1,800,000 shares
Common Stock offered by the Selling
Stockholders.................................... 200,000 shares
Common Stock to be outstanding after this
offering (1).................................... 4,600,000 shares
Use of Proceeds.................................. To repay bank indebtedness, finance the
development of Company-owned restaurants,
for possible acquisitions of bagel
restaurants, and for working capital and
general corporate purposes.
Nasdaq National Market Symbol.................... NYBE
</TABLE>

- ------------------------
(1) Excludes (i) 400,000 shares of Common Stock reserved for issuance under the
Company's 1996 Incentive Plan, of which options to acquire 271,000 shares
are outstanding as of the date of this Prospectus and (ii) 19,320 shares of
Common Stock issuable upon conversion of the Convertible Debenture, as
defined herein. See "Management -- 1996 Incentive Plan" and "Description of
Capital Stock -- Convertible Debenture."

4
<PAGE>
SUMMARY FINANCIAL AND RESTAURANT DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
TWENTY-SIX
YEAR ENDED DECEMBER 31, SIX MONTHS WEEKS ENDED
------------------------------- ENDED JUNE JUNE 30,
1993 1994 1995 (1) 30, 1995 1996 (2)
--------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues.......................................... $ 3,561 $ 5,822 $ 7,359 $ 3,539 $ 5,190
Operating income........................................ 99 647 666 394 676
Earnings before income taxes............................ 85 594 626 374 512
Net earnings............................................ 76 597 619 374 512
Pro forma to reflect income taxes (3):
Net earnings.......................................... $ 380 $ 311
Net earnings per share................................ $ 0.13 $ 0.10
Pro forma weighted average shares outstanding (in
thousands) (4)......................................... 2,978 2,978
RESTAURANT DATA:
System-wide sales (5)................................... $ 3,581 $ 7,260 $ 13,232 $ 5,623 $ 10,544
Company-owned restaurants (6):
Average period sales per restaurant................... 470 524 559 279 293
Average period sales per restaurant (excluding limited
hour restaurants) (7)................................ 513 604 635 316 322
Same restaurant sales increase........................ 21.0% 19.0% 9.8% 13.9% 5.1%
Number of restaurants open at end of period:
Company-owned......................................... 9 12 15 12 20
Franchised............................................ 2 9 25 16 30
--------- --------- --------- ----------- -----------
Total............................................... 11 21 40 28 50
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------

JUNE 30, 1996
-------------------------------
AS
PRO FORMA ADJUSTED
ACTUAL (8) (9)
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).............................................. $ (872) $ (1,124) $ 12,775
Total assets........................................................... 4,002 4,002 17,717
Total debt............................................................. 3,930 3,930 86
Stockholders' equity (deficit)......................................... (1,066) (1,341) 16,373
</TABLE>

- ------------------------
(1) The Company acquired two restaurants in December 1995. If such transactions
had occurred on January 1, 1995, "Total revenues," "Net earnings" and "Net
earnings per share" would have been approximately $8,761,000, $224,000 and
$0.08, respectively, for the year ended December 31, 1995, on a pro forma
basis. The pro forma results do not necessarily reflect what would have
occurred if the acquisitions had been made at the beginning of the
respective periods or the results that may occur in the future. See "Pro
Forma Condensed Combined Statement of Operations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview."

(2) Effective January 1, 1996, the Company elected to change its fiscal year end
from a calendar year end to a 52/53 week fiscal year, ending on the last
Sunday of the year, which consists of four 13-week periods.

(3) Reflects a pro forma adjustment assuming the Company had been treated as a C
corporation rather than as an S corporation for income tax purposes for the
periods presented. See "S Corporation Distributions" and Note 2(i) of Notes
to Combined Financial Statements.

5
<PAGE>
(4) See Note 2(i) of Notes to Combined Financial Statements.

(5) Reflects total sales of Company-owned restaurants and sales of franchised
restaurants as reported by franchisees or derived by the Company from other
data reported by franchisees.

(6) Reflects restaurants open throughout the entire period indicated. Same
restaurant sales reflects restaurants that were open during the entire
period indicated and the entire corresponding prior period.

(7) Limited hour restaurants are typically open Monday through Friday during
business hours. As of June 30, 1996, there were five Company-owned limited
hour restaurants and three franchised limited hour restaurants.

(8) Gives effect to (i) an accrual for the distribution of $184,000 to
stockholders as if the Company had terminated its S corporation status at
June 30, 1996 and made a distribution to the stockholders in connection with
their estimated federal and state income tax obligations, and (ii) the
establishment of a deferred tax liability in the estimated amount of $91,000
arising from the termination of the Company's S corporation status.

(9) As adjusted to reflect the sale of 1,800,000 shares of Common Stock offered
by the Company hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF COMMON STOCK
OFFERED HEREBY.

EXPANSION. As of June 30, 1996, there were 50 New York Bagel restaurants in
operation, consisting of 20 Company-owned and 30 franchised restaurants. In
addition, there were four Company-owned restaurants and four franchised
restaurants in various stages of development. By the end of 1996, the Company
contemplates having approximately 28 to 30 Company-owned and 45 to 50 franchised
restaurants in operation. The Company expects to have approximately 45 to 50
Company-owned and 70 to 80 franchised restaurants in operation by the end of
1997. The Company intends to use a significant portion of the net proceeds of
this offering to develop additional Company-owned restaurants. There can be no
assurance that the Company will be able to open all of its planned restaurants
or that, if opened, such restaurants can operate profitably. The opening and
success of New York Bagel restaurants will depend on various factors, not all of
which are within the control of the Company, including customer acceptance of
the Company's concept in new markets, the availability of suitable sites, the
negotiation of acceptable lease or purchase terms for new locations, permit and
regulatory compliance, the ability to meet construction schedules, the financial
and other capabilities of the Company and its franchisees, the ability of the
Company to successfully manage this anticipated expansion and to hire and train
personnel, and general economic and business conditions. Furthermore, because of
the Company's relatively small restaurant base, an unsuccessful restaurant could
have a more significant adverse effect on the Company's results of operations
than would be the case for a company with a larger restaurant base.

The Company's expansion will also require the implementation and integration
of enhanced operational and financial systems and additional management,
operational and financial resources. Failure to implement and integrate these
systems and add these resources could have a material adverse effect on the
Company's results of operations and financial condition. There can be no
assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth. The
Company experienced growth in revenues and net income in 1995 and in the period
ended June 30, 1996. There can be no assurance that the Company will continue to
experience growth in, or maintain its present level of, revenues or net
earnings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Expansion Strategy."

DEPENDENCE ON FRANCHISEES. The Company realizes a portion of its revenues
from initial franchise fees and continuing royalty payments from its
franchisees. If the Company's franchisees encounter business or operational
difficulties, the Company's revenues from royalties will be adversely affected.
Such difficulties may also negatively impact the Company's ability to sell new
franchises. Consequently, the Company's financial prospects are significantly
related to the success of its franchised restaurants, over which the Company has
limited direct operational control. There can be no assurance that the Company
will be able to successfully attract new franchisees or that the Company's
franchisees will be able to successfully operate existing or develop and operate
additional New York Bagel restaurants. See "Business -- Expansion Strategy" and
"Business -- Franchise Program."

COMPETITION. The quick-service restaurant industry is intensely competitive
and characterized by relatively low barriers to entry. New York Bagel
restaurants compete against many well established, quick-service restaurants,
local food establishments, supermarkets and convenience stores, many of which
have greater product and name recognition and larger financial and other
resources than the Company. An increase in the number of competitors,
particularly bagel restaurants or delicatessens, in the Company's territories
could have an adverse impact on the Company's results of operations and
expansion plans. See "Business -- Competition."

7
<PAGE>
LIMITED COMBINED OPERATING HISTORY. Although the business of the Company
began in 1986, the Company commenced operations as a combined entity in December
1995 and, as a result, has a limited combined operating history upon which
investors may base their evaluation of the Company's performance. As a result of
the Company's limited combined operating history, period-to-period comparisons
of operating results may not be meaningful and results of operations from prior
periods may not be indicative of future results. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

RESTAURANT INDUSTRY. The Company and the restaurant industry are
significantly affected by factors such as changes in local, regional or national
economic conditions, changes in consumer tastes and concerns about the
nutritional quality of quick-service foods. Multi-unit food service chains such
as the Company can also be substantially adversely affected by publicity
resulting from food quality, illness, injury or other health concerns or
operating issues stemming from one restaurant or a limited number of
restaurants. In addition, factors such as increases in food, labor and energy
costs, the availability and cost of suitable restaurant sites, fluctuating
insurance rates, state and local regulations and the availability of an adequate
number of hourly-paid employees can also adversely affect the restaurant
industry.

DEPENDENCE ON KEY PERSONNEL. The Company's future success will be highly
dependent on the continued efforts of senior management. The Company does not
have employment agreements with any of its senior management or employees. The
loss of the services of one or more of such key personnel could have a material
adverse effect upon the Company's results of operations. The Company's success
is also dependent upon its ability to attract and retain skilled restaurant
managers and employees and the ability of its key personnel to manage the
Company's growth and integrate its operations. There can be no assurance that
the Company will be successful in attracting and retaining such personnel. See
"Management."

INCREASES IN OPERATING COSTS; INTERRUPTIONS IN SUPPLIES. An increase in
operating costs could adversely affect the profitability of the Company. Factors
such as inflation, increased food and labor costs, including the proposed
increase in the minimum hourly wage requirement, and employee benefit costs and
the availability of qualified management and other personnel may adversely
affect the profitability of the Company. The cost and availability of many
restaurant commodities are subject to fluctuations due to seasonality, weather,
demand and other factors. The Company's restaurants are dependent on frequent
deliveries of food supplies and any shortages or interruptions could have a
material adverse effect on the Company. See "Business -- Purchasing and
Distribution."

GEOGRAPHIC CONCENTRATION. All but one of the Company-owned restaurants are
located in Oklahoma, Kansas and Tennessee. As a result, the Company's results of
operations may be materially affected by adverse business, economic or weather
conditions in these states. Although the Company plans to open additional
restaurants in new geographic areas, there can be no assurance that the current
geographic concentration of the Company's business will not have an adverse
effect on its results of operations or financial condition in the future.

POSSIBLE ACQUISITIONS. The Company's growth strategy includes possible
acquisitions of bagel restaurants. However, no assurance can be given that the
Company will be able to find attractive acquisition candidates, consummate
additional acquisitions or that it will successfully integrate, convert or
operate any acquired business. In the event that the Company makes acquisitions,
there can be no assurance that any such acquisition and resulting conversion
expenses, including loss of restaurant sales during the remodel period, will not
have a material adverse effect upon the Company's operating results,
particularly during the period in which such operations are being integrated
into the Company. Furthermore, the Company's ability to make acquisitions may
depend upon its ability to obtain financing. There can be no assurance that the
Company will be able to obtain financing on acceptable terms. See "Business --
Expansion Strategy."

FLUCTUATIONS IN QUARTERLY RESULTS. The timing of restaurant openings or
acquisitions, recognition of franchise fee income and seasonal factors may
result in fluctuations in quarterly operating results

8
<PAGE>
of the Company. In accordance with generally accepted accounting principles,
franchise and development fees and the corresponding deferred charges with
respect to each franchise or development agreement are not recognized as income
until a restaurant commences operations. There can be no assurance that
quarterly fluctuations will not continue and, accordingly, the Company's
financial results for a particular quarter may not be indicative of results for
an entire year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Quarterly Financial Data."

CONTROL OF COMPANY. Following completion of this offering, the directors
and executive officers of the Company will beneficially own approximately 45.3%
of the outstanding Common Stock of the Company (approximately 42.3% if the
Underwriters' over-allotment option is exercised in full). In addition, the
existing stockholders and the Company are parties to a certain stockholders'
agreement (the "Stockholders' Agreement"), which, among other things, sets forth
certain agreements regarding the designation and election of directors of the
Company. These stockholders will own approximately 56.5% of the outstanding
Common Stock following completion of this offering (approximately 52.8% if the
Underwriters' over-allotment option is exercised in full). Due to their
ownership position and the Stockholders' Agreement, such stockholders will
retain the power to direct the Company's business and affairs through their
ability to control the outcome of elections of the Company's Board of Directors
and to take other actions that require the vote or approval of the stockholders
of the Company. See "Management -- Stockholders' Agreement" and "Principal and
Selling Stockholders."

BENEFITS OF OFFERING TO CERTAIN STOCKHOLDERS. The Company's existing
stockholders are hereby offering an aggregate of 200,000 shares of Common Stock
(230,000 shares if the Underwriters' over-allotment option is exercised in
full). The Company will not receive any proceeds from the sale of shares by the
Selling Stockholders. In addition, the Company intends to use approximately $4.5
million of the proceeds of this offering to retire bank indebtedness of the
Company which certain stockholders have guaranteed either jointly and severally
or severally on either a limited or unlimited basis. A portion of such
indebtedness was used to fund prior distributions to stockholders. The Company
also intends to use a portion of the net proceeds of this offering to fund a
distribution to existing stockholders in connection with their estimated federal
and state income tax obligations attributable to the Company's 1996 earnings. If
the Company had terminated its S corporation status as of June 30, 1996, the
Company's S corporation taxable income for 1996 would have been approximately
$409,000 and the resulting distribution would have been approximately $184,000.
There can be no assurance as to the actual amount of the Company's S corporation
taxable income for 1996 up to the date the Company terminates its S corporation
status or the amount of the related distribution. See "S Corporation
Distributions," "Use of Proceeds," "Certain Transactions -- Stockholder
Guarantees" and "Principal and Selling Stockholders."

GOVERNMENT REGULATION. The Company is subject to numerous federal, state
and local government regulations, including those relating to the preparation
and sale of food, the sale of alcoholic beverages, public health and building
and zoning requirements. Also, the Company and its franchisees are subject to
laws governing their relationship with employees, including minimum wage
requirements, overtime, working conditions and citizenship requirements. The
Company is also subject to federal regulation and certain state laws which
govern the offer and sale of franchises. Many state franchise laws impose
substantive requirements on franchise agreements, including limitations on
non-competition provisions and termination or non-renewal of a franchise. Some
states require that certain franchise offering materials be registered before
franchises can be offered or sold in that state. The failure to obtain or retain
food licenses, alcoholic beverage licenses or approvals to sell franchises could
adversely affect the Company's and its franchisees' results of operations. The
future enactment, adoption or amendment of laws or regulations, such as
establishing basic franchisee rights, increasing the minimum wage or other costs
associated with employees, could adversely affect the Company's results of
operations. See "Business -- Franchise Program" and "Business -- Government
Regulation."

9
<PAGE>
TRADEMARKS AND SERVICE MARKS. The Company is aware of the use by other
persons and entities in certain geographic areas of names and marks that are the
same as or similar to the Company's marks. Some of these persons or entities may
have prior rights to those names or marks in their respective localities.
Negative publicity surrounding such businesses may adversely affect the
Company's operations in those markets. In addition, the Company's marks contain
common descriptive words and thus may be subject to challenge by users of these
words, alone or in combination with other words, which describe other services
or products. Accordingly, there is no assurance that the Company's marks will be
available in all locations or that a challenge to the Company's use of such
marks will not result in adverse consequences, including a judgment that would
entail damages and/or the discontinuation of the Company's use of its marks. It
is the Company's policy to utilize other compatible marks in areas where there
are preexisting competing marks. See "Business -- Trademarks and Service Marks."

CLASSIFIED BOARD OF DIRECTORS. Concurrent with the completion of this
offering, the Company's Restated and Amended Articles of Incorporation and
Restated and Amended Bylaws will provide for a classified Board of Directors.
The terms of each class expire in consecutive years so that only one class is
elected in any given year. Such provisions could delay, deter or prevent a
merger, consolidation, tender offer, or other business combination or change of
control involving the Company that some or a majority of the Company's
stockholders might consider to be in their best interests, including offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price for the Common Stock. See "Management -- Term of
Office" and "Description of Capital Stock -- Certain Anti-Takeover Matters."

PREFERRED STOCK. Concurrent with the completion of this offering, the
Company's Restated and Amended Articles of Incorporation and Restated and
Amended Bylaws will authorize shares of Preferred Stock with respect to which
the Board of Directors of the Company will have the power to fix the rights,
preferences, privileges and restrictions without any further vote or action by
the stockholders. Depending upon the rights of such Preferred Stock, the
issuance of Preferred Stock could have an adverse effect on holders of Common
Stock by delaying or preventing a change in control of the Company, diluting the
voting rights of holders of Common Stock, making removal of the present
managment of the Company more difficult or reducing or restricting the payment
of dividends and other distributions to the holders of Common Stock, including,
without limitation, any liquidation preferences which may relate to such
Preferred Stock. Such provisions could delay, deter or prevent a merger,
consolidation, tender offer, or other business combination or change of control
involving the Company that some or a majority of the Company's stockholders
might consider to be in their best interests, including offers or attempted
takeovers that might otherwise result in such stockholders receiving a premium
over the market price for the Common Stock. See "Description of Capital Stock --
Preferred Stock."

SUPERMAJORITY STOCKHOLDER VOTES. Concurrent with the completion of this
offering, the Company's Restated and Amended Articles of Incorporation and
Restated and Amended Bylaws will require the affirmative vote of the holders of
at least two-thirds of the outstanding capital stock in order to remove
directors for cause, amend the Bylaws and approve certain business combinations
with respect to a "related person." Such provisions could delay, deter or
prevent a merger, consolidation, tender offer, or other business combination or
change of control involving the Company that some or a majority of the Company's
stockholders might consider to be in their best interests, including offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price for the Common Stock. See "Description of Capital
Stock -- Certain Anti-Takeover Matters."

DILUTION; ABSENCE OF PRIOR PUBLIC MARKET AND VOLATILITY OF STOCK
PRICE. This offering will result in immediate substantial dilution of net
tangible book value of $7.54 per share to new investors, which amount represents
the difference between the pro forma net tangible book value per share after the
offering and an assumed initial public offering price of $11.00 per share. Prior
to this offering, there has been no public market for the Common Stock. Although
the Company's Common Stock has been approved for listing on the Nasdaq National
Market, subject to notice of issuance, there can be no

10
<PAGE>
assurance that an active market will develop or be sustained following this
offering; therefore, a purchaser of the Common Stock may not be able to readily
liquidate its investment in the Common Stock. The initial public offering price
for the shares of Common Stock sold in this offering will be determined through
negotiations between the Company and the representatives of the underwriters and
will not necessarily reflect the market prices for the Common Stock following
this offering.

Market prices for the Common Stock following this offering will be
influenced by a number of factors, including the Company's operating results and
other factors affecting the Company specifically and the restaurant industry and
the financial markets generally, as well as the liquidity of the market for the
Common Stock. The Company believes that the market price of its Common Stock
will reflect expectations that the Company will be able to continue to operate
its restaurants profitably and to develop new restaurants at a significant rate
and operate them profitably. If the Company is unable to operate its restaurants
as profitably and develop restaurants at a pace that reflects the expectations
of the market, investors could sell shares of the Common Stock at or after the
time that it becomes apparent that such expectations may not be realized,
resulting in a decrease in the market price of the Common Stock. In recent years
the stock market has experienced extreme price and volume fluctuations. This
volatility has had a significant effect on the market prices of securities
issued by many companies for reasons unrelated to their operating performance.
See "Dilution" and "Underwriting."

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of this offering, the
Company will have outstanding 4,600,000 shares of Common Stock (4,870,000 shares
of Common Stock if the Underwriters' over-allotment option is exercised in
full). Of these shares, the shares sold in this offering will be tradeable
without restriction unless they are purchased by affiliates of the Company.
Shares of Common Stock outstanding prior to completion of this offering will be
"restricted securities" as that term is defined in Rule 144 ("Rule 144")
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
These "restricted securities," and any shares purchased by affiliates of the
Company in this offering may be publicly sold only if registered under the
Securities Act or if sold in accordance with an available exemption from
registration, such as those provided by Rule 144. The holders of 2,600,000
shares of such "restricted securities" have agreed that they will not, directly
or indirectly, sell or otherwise dispose of any of such shares for a period of
180 days after the date of this Prospectus, without the prior written consent of
Rauscher Pierce Refsnes, Inc., on behalf of the representatives of the
underwriters. No prediction can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sales, will have on
the market price of the Common Stock. The sale of substantial amounts of Common
Stock, or the perception that such sales could occur, could adversely affect the
prevailing market price for the Common Stock. See "Shares Eligible For Future
Sale."

11
<PAGE>
S CORPORATION DISTRIBUTIONS

Since January 1, 1994, the Company and certain of the Prior Entities (as
defined herein) have been treated for federal and state income tax purposes as S
corporations under Subchapter S of the Internal Revenue Code of 1986, as amended
(the "Code"). Since such date, the Company's earnings have been and will be
taxed for federal and most state income tax purposes directly to the Company's
stockholders, rather than to the Company, through the date immediately prior to
the date of termination of the Company's S corporation status (the "Termination
Date"). The Termination Date will occur on the day immediately prior to the
completion of this offering. The Company will be responsible for the payment of
all federal and state income taxes on earnings beginning on the Termination Date
and continuing thereafter. See Notes 2 and 9 of Notes to Combined Financial
Statements and Pro Forma Balance Sheet as of June 30, 1996.

Certain Prior Entities paid cash distributions to their stockholders in the
aggregate amounts of approximately $394,000 and $2.5 million during 1994 and
1995, respectively. See "Certain Transactions -- Distributions." The
distributions made in 1995 were in excess of the earnings of such Prior Entities
and were partially funded by borrowings of such Prior Entities which were
assumed by the Company in connection with the Reorganization, as defined herein.
The Company intends to repay all of its bank borrowings with a portion of the
net proceeds of this offering. The Company also intends to use a portion of the
net proceeds of this offering to fund a distribution to the existing
stockholders in connection with their estimated federal and state income tax
obligations attributable to the Company's 1996 earnings prior to the Termination
Date. If the Company had terminated its S corporation status as of June 30,
1996, the Companys' S corporation taxable income for 1996 would have been
approximately $409,000 and the resulting distribution would have been
approximately $184,000. There can be no assurance as to the actual amount of the
Company's S corporation taxable income for 1996 up to the date the Company
terminates its S corporation status or the amount of the related distribution.
Under federal tax laws, if the Company fails to distribute its undistributed S
corporation earnings within a limited period of time following the Termination
Date, a later distribution could be taxed as a dividend to the stockholders. No
S corporation distributions will be made to the stockholders in connection with
the Company's earnings for any period beginning on or after the Termination
Date.

Had the Company's S corporation election terminated effective June 30, 1996,
the Company would have recognized a deferred tax liability of approximately
$91,000 at the current corporation tax rate pursuant to Statement of Financial
Accounting Standards No. 109, which represents the cumulative amount of
temporary differences that have been deducted by the Company for income tax
purposes but have not yet been expensed for financial accounting purposes. See
"Selected Combined Financial Data" and Notes 2, 9 and 15 of Notes to Combined
Financial Statements.

DIVIDEND POLICY

The Company currently intends to retain all earnings to provide funds for
its operations and expansion, and therefore does not anticipate paying cash
dividends or making any other distributions on its shares of Common Stock in the
foreseeable future. The Company's future dividend policy will be determined by
its Board of Directors based on various factors, including the Company's results
of operations, financial condition, business opportunities, capital
requirements, credit restrictions and such other factors as the Board of
Directors may deem relevant.

The Company and certain Prior Entities have been treated for federal and
state income tax purposes as S corporations under the Code since January 1,
1994. As a result, earnings of the Company were subject to taxation at the
stockholder level rather than the corporate level for federal and certain state
income tax purposes. Certain of the Prior Entities have previously made
distributions to their stockholders in connection with the Reorganization and
the Company intends to make distributions to its stockholders in connection with
its status as an S corporation. However, no S corporation distributions will be
made to the existing stockholders in connection with the Company's earnings for
any period beginning on or after the Termination Date. See "S Corporation
Distributions."

12
<PAGE>
USE OF PROCEEDS

The net proceeds from the sale of the shares of Common Stock offered by the
Company are estimated to be approximately $17.7 million (approximately $20.5
million if the Underwriter's over-allotment option is exercised in full),
assuming an initial public offering price of $11.00 per share and after
deducting the underwriting discount and other estimated offering expenses. The
Company will not receive any proceeds from the sale of the shares of Common
Stock by the Selling Stockholders.

The Company intends to use approximately $4.5 million of the net proceeds
for repayment of indebtedness, as discussed below, and an amount sufficient to
fund a distribution to the existing stockholders in connection with their
estimated federal and state income tax obligations attributable to the Company's
1996 earnings prior to the Termination Date. If the Company had terminated its S
corporation status as of June 30, 1996, the Company's S corporation taxable
income for 1996 would have been approximately $409,000 and the resulting
distribution would have been approximately $184,000. See "S Corporation
Distributions." The balance of the net proceeds, together with cash flows from
operations, will be used to finance future development of Company-owned
restaurants, possible acquisitions, working capital requirements and for general
corporate purposes. The Company presently does not have any specific plans,
arrangements, understandings or agreements regarding any material acquisitions;
however, the Company will continue to evaluate suitable acquisitions of bagel
restaurant businesses as they are identified.

The Company intends to use approximately $4.5 million of the net proceeds to
repay all indebtedness outstanding under its bank financing, approximately $3.8
million of which was outstanding as of June 30, 1996 and up to $747,500 of which
has been, or is anticipated to be, incurred subsequent to June 30, 1996. This
bank debt consists of the following:

- A loan agreement (the "Loan Agreement"), the proceeds of which were used
to fund stockholder distributions and for working capital purposes. The
Loan Agreement bears interest at the prime rate plus 1.0% (9.25% at June
30, 1996), has a maturity date of December 28, 2000 and had an outstanding
balance of approximately $2.5 million as of June 30, 1996.

- Six term notes (the "Term Notes"), the proceeds of which are being used to
fund the current development of Company-owned restaurants. The Term Notes
bear interest at the prime rate plus 0.5% (8.75% at June 30, 1996), have a
maturity date of June 15, 2003 and had an aggregate outstanding balance of
approximately $800,000 as of June 30, 1996.

- A term loan (the "Nashville Note") incurred in connection with the
acquisition of Nashville Bagel Co., Inc. The Nashville Note bears interest
at the prime rate plus 0.5% (8.75% at June 30, 1996), has a maturity date
of March 26, 2003 and had an outstanding balance of approximately $487,000
as of June 30, 1996.

- A term loan (the "Stillwater Note") dated July 10, 1996 for $300,000 used
to purchase land and building for an additional restaurant location in
Stillwater, Oklahoma. The Stillwater Note bears interest at the prime rate
plus 0.5% (8.75% at July 10, 1996), and has a maturity date of January 10,
2007.

- A term loan (the "Springfield Note") dated July 8, 1996 for $125,000 used
to fund the development of a Company-owned restaurant in Springfield,
Missouri. The Springfield Note bears interest at the prime rate plus 0.5%
(8.75% at July 8, 1996), and has a maturity date of October 8, 2001.

- A term loan (the "Remodel Note") dated July 8, 1996 for $172,500 used for
funding of the remodeling of three existing Company-owned restaurants in
Oklahoma. The Remodel Note bears interest at the prime rate plus 0.5%
(8.75% at July 8, 1996) and has a maturity date of July 8, 2001.

- A term loan (the "Lubbock Note") dated July 15, 1996 for $150,000 used to
fund the development of a Company-owned restaurant in Lubbock, Texas. The
Lubbock Note bears interest at the prime rate plus 0.5% (8.75% at July 15,
1996), and has a maturity date of October 15, 2003.

See Note 7 of the Notes to Combined Financial Statements and "Certain
Transactions."

Pending use of the proceeds as set forth above, the Company intends to
invest the net proceeds in interest-bearing, short-term, investment-grade
securities.

13
<PAGE>
DILUTION

At June 30, 1996, the Company had a pro forma net tangible book value
(deficit) of approximately $(1.8 million), or $(0.65) per share of Common Stock.
Net tangible book value per share of Common Stock is defined as total tangible
assets of the Company less total liabilities, divided by the total number of
shares of Common Stock outstanding, without giving effect to the possible
exercise of outstanding stock options or other convertible securities. After
giving effect to the sale of the shares of Common Stock offered hereby at an
assumed initial public offering price of $11.00 per share and the application of
the estimated net proceeds therefrom, the pro forma net tangible book value of
the Company at June 30, 1996 would have been approximately $15.9 million, or
$3.46 per share. This represents an immediate increase in pro forma net tangible
book value of approximately $4.11 per share to existing stockholders, and an
immediate dilution of $7.54 per share to new investors purchasing shares of
Common Stock in this offering. The following table illustrates the per share
dilution to new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $ 11.00
Pro forma net tangible book value (deficit) per share.... $ (0.65)
Increase in net tangible book value per share
attributable to payments by investors of Common Stock in
this offering........................................... 4.11
---------
Pro forma net tangible book value per share after this offering....... 3.46
---------
Dilution per share to new investors................................... $ 7.54
---------
---------
</TABLE>

The following table summarizes, at June 30, 1996, the number of shares of
Common Stock purchased from the Company, the total consideration paid to the
Company and the average price paid per share by existing stockholders and new
investors purchasing shares in this offering at an assumed initial public
offering price of $11.00 per share:

<TABLE>
<CAPTION>
SHARES PURCHASED(1)(2)
TOTAL CONSIDERATION
------------------------ --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders....................... 2,800,000 60.9% $ 185,650 0.9% $ 0.07
New investors............................... 1,800,000 39.1 19,800,000 99.1 11.00
----------- ----- -------------- -----
Total..................................... 4,600,000 100.0% $ 19,985,650 100.0%
----------- ----- -------------- -----
----------- ----- -------------- -----
</TABLE>

- ------------------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 2,600,000, or 56.5% of the total
number of shares of Common Stock to be outstanding after this offering, and
will increase the number of shares held by new investors to 2,000,000
shares, or 43.5% of the total shares of Common Stock to be outstanding after
this offering. See "Principal and Selling Stockholders" and "Underwriting."

(2) Excludes (i) 400,000 shares of Common Stock reserved for issuance under the
Company's 1996 Incentive Plan, of which options to acquire 271,000 shares
are outstanding as of the date of this Prospectus and (ii) 19,320 shares of
Common Stock issuable upon conversion of the Convertible Debenture, as
defined herein. See "Management -- 1996 Incentive Plan" and "Description of
Capital Stock -- Convertible Debenture."

14
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and capitalization of the
Company at June 30, 1996 (i) on an actual basis, (ii) on a pro forma basis as if
the Company had terminated its S corporation status as of June 30, 1996 and made
a distribution to the stockholders in connection with their estimated federal
and state income tax obligations, and (iii) as adjusted to give effect to the
sale of 1,800,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $11.00 per share and the application of
the estimated net proceeds therefrom. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's Combined Financial Statements and
the Notes thereto included elsewhere in this Prospectus. See "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt.............................................................. $ 649 $ 649 $ 29
--------- ----------- -----------
--------- ----------- -----------
Distributions payable........................................................ 49 233 49
--------- ----------- -----------
--------- ----------- -----------
Long-term debt, less current portion......................................... $ 3,281 $ 3,281 $ 86
Stockholders' equity (deficit):
Preferred stock, 5,000,000 shares authorized, no par value, none issued or
outstanding (1)........................................................... -- -- --
Common stock, $0.01 par value, 30,000,000 shares authorized; 2,800,000
shares issued and outstanding, actual; 4,600,000 shares issued and
outstanding, as adjusted (2).............................................. 28 28 46
Additional paid-in capital (deficit)....................................... 158 (1,369) 16,327
Accumulated deficit........................................................ (1,252) -- --
--------- ----------- -----------
Total stockholders' equity (deficit)......................................... (1,066) (1,341) 16,373
--------- ----------- -----------
Total capitalization......................................................... $ 2,215 $ 1,940 $ 16,459
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

- ------------------------
(1) Concurrent with the completion of this offering, the Company's Restated and
Amended Articles of Incorporation will authorize the issuance of preferred
stock. See "Description of Capital Stock."

15
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table sets forth selected combined financial data for the
Company at the dates and for the periods indicated. The selected combined
financial data at December 31, 1994 and 1995 and for each of the years in the
three-year period ended December 31, 1995 have been derived from the Combined
Financial Statements of the Company which have been audited by KPMG Peat Marwick
LLP, independent certified public accountants, and which are included elsewhere
in this Prospectus. The selected combined financial data at December 31, 1991,
1992 and 1993 and June 30, 1996, and for each of the years in the two-year
period ended December 31, 1992, and for the six months ended June 30, 1995 and
the twenty-six weeks ended June 30, 1996, have been prepared on the same basis
as the audited financial statements, have been derived from the unaudited
Combined Financial Statements of the Company for such periods and include, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for the fair presentation of the financial position and
combined results of operations at and for such periods. The Company's combined
results of operations for the twenty-six weeks ended June 30, 1996 may not be
indicative of its combined results of operations for the full year. Selected
combined financial data should be read in conjunction with, and is qualified in
its entirety by, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Combined Financial Statements of the Company
and the Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995(1)
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales from Company-owned restaurants........................... $ 1,596 $ 2,438 $ 3,539 $ 5,653 $ 6,875
Franchise revenues............................................. -- -- 22 169 484
--------- --------- --------- --------- ---------
Total revenues............................................... 1,596 2,438 3,561 5,822 7,359
Costs and expenses:
Cost of sales.................................................. 789 1,192 1,527 2,280 2,612
Restaurant operating expenses.................................. 594 985 1,386 2,326 3,084
General and administrative expenses............................ 152 203 469 452 838
Depreciation and amortization.................................. 43 57 80 117 159
--------- --------- --------- --------- ---------
Total costs and expenses..................................... 1,578 2,437 3,462 5,175 6,693
Operating income............................................. 18 1 99 647 666
Interest expense, net............................................ 20 18 14 53 40
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes............................ (2) (17) 85 594 626
Income tax expense (benefit)..................................... 2 (1) 9 (3) 7
--------- --------- --------- --------- ---------
Net earnings (loss).......................................... $ (4) $ (16) $ 76 $ 597 $ 619
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma to reflect income taxes (3):
Net earnings................................................... $ 380
Net earnings per share......................................... $ 0.13
Pro forma weighted average shares outstanding (4)................ 2,978

DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital deficit.......................................... $ (4) $ (67) $ (171) $ (120) $ (368)
Total assets..................................................... 294 347 819 872 2,295
Total debt....................................................... 234 230 560 359 3,365
Stockholders' equity (deficit)................................... 16 51 126 159 (1,578)

<CAPTION>
TWENTY-SIX
SIX MONTHS WEEKS ENDED
ENDED JUNE JUNE 30,
30, 1995 1996(2)
----------- -----------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Sales from Company-owned restaurants........................... $ 3,345 $ 4,850
Franchise revenues............................................. 194 340
----------- -----------
Total revenues............................................... 3,539 5,190
Costs and expenses:
Cost of sales.................................................. 1,273 1,733
Restaurant operating expenses.................................. 1,433 2,202
General and administrative expenses............................ 375 402
Depreciation and amortization.................................. 64 177
----------- -----------
Total costs and expenses..................................... 3,145 4,514
Operating income............................................. 394 676
Interest expense, net............................................ 20 164
----------- -----------
Earnings (loss) before income taxes............................ 374 512
Income tax expense (benefit)..................................... -- --
----------- -----------
Net earnings (loss).......................................... $ 374 $ 512
----------- -----------
----------- -----------
Pro forma to reflect income taxes (3):
Net earnings................................................... $ 311
Net earnings per share......................................... $ 0.10
Pro forma weighted average shares outstanding (4)................ 2,978

JUNE 30, 1996
------------------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital deficit.......................................... $ (872)
Total assets..................................................... 4,002
Total debt....................................................... 3,930
Stockholders' equity (deficit)................................... (1,066)
</TABLE>

- ------------------------------
(1) The Company acquired two restaurants in December 1995. If such transactions
had occurred on January 1, 1995, "Total revenues," "Net earnings" and "Net
earnings per share" would have been approximately $8,761,000, $224,000 and
$0.08, respectively, for the year ended December 31, 1995, on a pro forma
basis. The pro forma results do not necessarily reflect what would have
occurred if the acquisitions had been made at the beginning of the
respective periods or the results that may occur in the future. See "Pro
Forma Condensed Combined Statement of Operations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview."
(2) Effective January 1, 1996, the Company elected to change its fiscal year end
from a calendar year end to a 52/53-week fiscal year, ending on the last
Sunday of the year, which consists of four 13-week periods.
(3) Reflects a pro forma adjustment assuming the Company had been treated as a C
corporation rather than as an S corporation for income tax purposes for the
periods presented. See "S Corporation Distributions" and Note 2(i) of Notes
to Combined Financial Statements.
(4) See Note 2(i) of Notes to Combined Financial Statements.

16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

The Company opened its first restaurant in 1986, and has developed 18 of its
20 Company-owned restaurants in Oklahoma, Kansas, Tennessee and Texas. In
addition to developing new restaurants, the Company acquired two bagel
restaurants in December 1995, one of which was a franchised New York Bagel
restaurant. The Company commenced franchising the New York Bagel concept in 1993
and currently has 20 franchisees operating 30 restaurants.

The Company's business was previously operated through six separate
entities, each of which was owned by one or more existing stockholders
(collectively, the "Prior Entities"). The Company was incorporated in December
1995 under the laws of Kansas, and on December 31, 1995, the Prior Entities were
merged into the Company (the "Reorganization"). The financial statements herein
include the results of operations of the Prior Entities on a combined basis for
all periods. See "Certain Transactions -- Reorganization" and Note 1 of the
Notes to Combined Financial Statements.

The Company completed the acquisition of two bagel restaurants in December
1995 (the "Acquisitions"). The Company acquired the outstanding stock of
Nashville Bagel Co., Inc. ("Nashville Bagel"), which operated a bagel restaurant
in Nashville, Tennessee, and acquired a franchised New York Bagel restaurant
located in Wichita, Kansas. Each Acquisition was accounted for under the
purchase method, and accordingly, the operations of Nashville Bagel and the
acquired franchised restaurant have been included in the Company's combined
results of operations after December 14, 1995 and December 31, 1995,
respectively. Pro Forma Condensed Combined Statement of Operations included
herein presents the results of operations of the Company as if the Acquisitions
had occurred at January 1, 1995. See "Certain Transactions -- Franchise
Acquisitions" and Note 12 of the Notes to Combined Financial Statements.

The Company's revenues are derived from sales from Company-owned restaurants
and franchise revenues, which consist of royalties from franchised restaurant
sales as well as franchise and development fees. Franchise and development fees
are initially recorded as deferred revenue until each franchised restaurant
opens, at which time these fees are recorded as revenue.

Cost of sales includes food, paper and beverage costs associated with
Company-owned restaurants. Restaurant operating expenses consist primarily of
labor costs, rent, advertising, utilities, maintenance and insurance associated
with Company-owned restaurants. General and administrative expenses include
corporate and administrative salaries, accounting, legal and direct costs
associated with franchise operations.

17
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth the percentage relationship of certain
operating statement data to total revenues, except as otherwise indicated:

<TABLE>
<CAPTION>
SIX MONTHS TWENTY-SIX
YEAR ENDED DECEMBER 31, ENDED JUNE WEEKS ENDED
------------------------------- 30, JUNE 30,
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Sales from Company-owned restaurants.......................... 99.4% 97.1% 93.4% 94.5% 93.5%
Franchise revenues............................................ 0.6 2.9 6.6 5.5 6.5
--------- --------- --------- ----- -----
Total revenues.............................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales (1)............................................. 43.2% 40.3% 38.0% 38.0% 35.7%
Restaurant operating expenses (1)............................. 39.2 41.1 44.9 42.8 45.4
General and administrative expenses........................... 13.2 7.8 11.4 10.6 7.7
Depreciation and amortization................................. 2.3 2.0 2.2 1.8 3.4
Operating income................................................ 2.8 11.1 9.0 11.1 13.0
Interest expense, net........................................... 0.4 0.9 0.5 0.6 3.1
Net earnings.................................................. 2.1 10.3 8.4 10.6 9.9
</TABLE>

- ------------------------
(1) As a percentage of sales from Company-owned restaurants.

TWENTY-SIX WEEKS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

Total revenues increased by $1.7 million, or 46.6%, to $5.2 million for the
period ended June 30, 1996 compared to $3.5 million for the period ended June
30, 1995, primarily due to an increase in the number of Company-owned and
franchised restaurants open.

Sales from Company-owned restaurants increased $1.5 million, or 45.0%, to
$4.8 million for the period ended June 30, 1996 compared to $3.3 million for the
period ended June 30, 1995. This increase is largely the result of the
acquisitions of Nashville Bagel and a franchised restaurant in December 1995,
the opening of a Company-owned restaurant in October 1995, and the opening of
five additional Company-owned restaurants during the first half of 1996. In
addition, the Company experienced a 5.1% increase in same restaurant sales
during the period. At June 30, 1996, the Company had 20 Company-owned
restaurants compared to 12 restaurants at June 30, 1995.

Franchise revenues increased by $146,000, or 75.7%, to $340,000 for the
period ended June 30, 1996 compared to $193,000 for the period ended June 30,
1995. This increase is primarily due to an increase in royalty revenue of
$136,000, or 156.3%, to $223,000 for the period ended June 30, 1996 from $87,000
during the period ended June 30, 1995. This is attributable to the significant
growth in the number of franchised restaurants opened during the last half of
1995 and continuing into the first half of 1996. At June 30, 1996, there were 30
franchised restaurants compared to 16 restaurants at June 30, 1995.

Cost of sales increased by $461,000, or 36.2%, to $1.7 million for the
period ended June 30, 1996 compared to $1.3 million for the period ended June
30, 1995, primarily due to the increase in Company-owned restaurant sales
discussed above. As a percentage of Company-owned restaurant sales, cost of
sales decreased to 35.7% for the period ended June 30, 1996 from 38.0% for the
period ended June 30, 1995, as a result of purchasing and operating efficiencies
experienced in 1996. Prices of the Company's commodities (meat and cheese, flour
and other bakery ingredients) have generally remained stable during the
comparable periods.

Restaurant operating expenses increased by $769,000, or 53.7%, to $2.2
million for the period ended June 30, 1996 compared to $1.4 million for the
period ended June 30, 1995, primarily due to the

18
<PAGE>

increase in restaurant sales discussed above. As a percentage of Company-owned
restaurant sales, restaurant operating expenses increased to 45.4% for the
period ended June 30, 1996 from 42.8% for the period ended June 30, 1995. This
increase is primarily due to increased labor costs associated with the Company's
acquisition of Nashville Bagel in December 1995, and the opening of three
Company-owned restaurants in Nashville, Tennessee during the first half of 1996.

General and administrative expenses increased by $27,000, or 7.2%, to
$402,000 for the period ended June 30, 1996 compared to $375,000 for the period
ended June 30, 1995. This increase is primarily attributable to the increase in
franchise activity. As a percentage of total revenues, general and
administrative expenses decreased to 7.7% for the period ended June 30, 1996
from 10.6% for the period ended June 30, 1995. The decrease as a percentage of
total revenues was primarily due to increased economies of scale resulting from
franchise infrastructure implemented in 1995.

Depreciation and amortization increased by $112,000, or 174.4%, to $177,000
for the period ended June 30, 1996 compared to $65,000 for the period ended June
30, 1995. As a percentage of total revenues, depreciation and amortization
increased to 3.4% for the period ended June 30, 1996 from 1.8% for the period
ended June 30, 1995. This increase is primarily the result of higher
depreciation and amortization associated with the Acquisitions, and the opening
of five additional Company-owned restaurants during the first half of 1996.

Interest expense increased by $143,000 to $163,000 for the period ended June
30, 1996 compared to the period ended June 30, 1995. This increase in interest
expense is primarily the result of increased borrowings during the period ended
June 30, 1996.

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994

Total revenues increased by $1.5 million, or 26.4%, to $7.4 million for 1995
compared to $5.8 million for 1994, primarily due to an increase in the number of
Company-owned and franchised restaurants open.

Sales from Company-owned restaurants increased $1.2 million, or 21.6%, to
$6.9 million for 1995 compared to $5.7 million for 1994. This is primarily the
result of the opening of one additional Company-owned restaurant in October 1995
and two additional Company-owned restaurants in late 1994. In addition, the
Company experienced an 9.8% increase in same restaurant sales during 1995. At
December 31, 1995, the Company had 15 Company-owned restaurants compared to 12
restaurants at December 31, 1994.

Franchise revenues increased by $315,000, or 187.1%, to $484,000 for 1995
compared to $169,000 for 1994. This increase is primarily due to the opening of
franchised restaurants in 1995. There were 25 franchised restaurants at the end
of 1995 and nine franchised restaurants at the end of 1994, which impacted both
franchise fees and royalty revenue. Franchise and development fees increased
$143,000, or 132.4%, to $251,000 for 1995 compared to $108,000 for 1994.
Franchise royalty revenue increased by $173,000, or 283.6%, to $234,000 for 1995
compared to $61,000 for 1994.

Cost of sales increased by $333,000, or 14.6%, to $2.6 million for 1995
compared to $2.3 million for 1994. This increase is primarily attributable to
the increase in sales from Company-owned restaurants. As a percentage of sales
from Company-owned restaurants, cost of sales decreased to 38.0% in 1995 from
40.3% in 1994 as a result of purchasing and operating efficiencies and
portioning refinements achieved in 1995. Prices of the Company's commodities
(meat and cheese, flour and other bakery ingredients) have generally remained
stable during the comparable periods.

Restaurant operating expenses increased by $758,000, or 32.6%, to $3.1
million for 1995 compared to $2.3 million for 1994. This increase is primarily
due to the increase in sales from Company-owned restaurants discussed above and
to approximately two weeks of operating expenses attributable to Nashville Bagel
subsequent to its acquisition by the Company on December 14, 1995. As a
percentage of sales from Company-owned restaurants, restaurant operating
expenses increased to

19
<PAGE>
44.9% for 1995 from 41.1% for 1994. This increase is primarily the result of
higher operating expenses attributable to a restaurant which opened in October
1995, the acquisition of Nashville Bagel and two restaurants which were closed
for remodeling during a portion of the fourth quarter of 1995.

General and administrative expenses increased by $386,000, or 85.5%, to
$838,000 for 1995 compared to $452,000 for 1994. This increase is primarily
attributable to the increase in franchise activity and to merger-related
expenses related to the Reorganization in 1995. As a percentage of total
revenues, general and administrative expenses increased to 11.4% in 1995 from
7.8% in 1994, primarily as a result of the further development of the franchise
program.

Depreciation and amortization increased by $42,000, or 35.9%, to $159,000
for 1995 compared to $117,000 for 1994. As a percentage of total revenues,
depreciation and amortization increased to 2.2% for 1995 from 2.0% in 1994. This
increase is primarily attributable to the opening of the additional restaurants
discussed above.

Interest expense decreased by $12,000 to $40,000 for 1995 compared to 52,000
for 1994. This decrease in interest expense is primarily the result of lower
bank borrowings during 1995.

FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993

Total revenues increased by $2.2 million, or 63.5%, to $5.8 million for 1994
compared to $3.6 million for 1993, primarily due to an increase in the number of
Company-owned and franchised restaurants open.

Sales from Company-owned restaurants increased $2.1 million, or 59.8%, to
$5.7 million for 1994 compared to $3.5 million for 1993. This is primarily the
result of the opening of three additional Company-owned restaurants in 1994. In
addition, the Company experienced a 19.0% increase in same restaurant sales
during 1994. At December 31, 1994, the Company had 12 Company-owned restaurants
compared to nine restaurants at December 31, 1993.

Franchise revenues increased by $146,000 to $169,000 for 1994 compared to
$23,000 for 1993. This increase is primarily due to the opening of franchised
restaurants in 1994. There were nine franchised restaurants open at the end of
1994 versus two franchised restaurants at the end of 1993.

Cost of sales increased by $753,000, or 49.3%, to $2.3 million for 1994
compared to $1.5 million for 1993. This increase is primarily attributable to
the opening of three additional Company-owned restaurants in 1994. As a
percentage of Company-owned restaurant sales, cost of sales decreased to 40.3%
in 1994 from 43.2% in 1993 primarily as a result of purchasing and operating
efficiencies. Prices of the Company's commodities (meat and cheese, flour and
other bakery ingredients) have generally remained stable during the comparable
periods.

Restaurant operating expenses increased by $940,000, or 67.8%, to $2.3
million for 1994 compared to $1.4 million for 1993. This increase is primarily
due to the additional restaurant openings discussed above. As a percentage of
Company-owned restaurant sales, restaurant operating expenses increased to 41.1%
for 1994 from 39.2% for 1993.

General and administrative expenses decreased by $17,000, or 3.6%, to
$452,000 for 1994 compared to $469,000 for 1993. This decrease is primarily the
result of a reduction in management compensation in 1994. This decrease was
offset slightly by an increase in general and administrative expenses related to
the increase in franchise activity. As a percentage of total revenue, general
and administrative expenses decreased to 7.8% in 1994 from 13.2% in 1993.

Depreciation and amortization increased by $37,000, or 45.9%, to $117,000
for 1994 compared to $80,000 for 1993. This increase is primarily attributable
to the opening of the additional restaurants discussed above. As a percentage of
total revenues, depreciation and amortization decreased to 2.0% in 1994 from
2.3% in 1993.

20
<PAGE>
Interest expense increased by $39,000 to $52,000 for 1994 compared to 1993.
This increase in interest expense is primarily the result of increased bank
borrowings in order to expand the Company's restaurant base.

QUARTERLY FINANCIAL DATA

The following sets forth selected quarterly results from operations. This
information is derived from unaudited financial statements of the Company and
includes in the opinion of management, all normal and recurring adjustments that
management considers necessary for a fair statement of the results for such
periods. The operating results for any quarter are not necessarily indicative of
results for any future period.

<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED ENDED ENDED
3/31/95 6/30/95 9/30/95 12/31/95 3/31/96 6/30/96
--------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Sales from Company-owned restaurants............. $ 1,649 $ 1,696 $ 1,652 $ 1,878 $ 2,219 $ 2,631
Franchise revenues............................... 59 135 145 145 170 170
--------- --------- --------- --------- --------- ---------
Total revenues................................. 1,708 1,831 1,797 2,023 2,389 2,801
--------- --------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales.................................... 636 637 649 690 813 920
Restaurant operating expenses.................... 705 727 759 893 960 1,242
General and administrative expenses.............. 159 216 192 271 207 195
Depreciation and amortization.................... 31 34 41 53 71 106
--------- --------- --------- --------- --------- ---------
Total costs and expenses....................... 1,531 1,614 1,641 1,907 2,051 2,463
--------- --------- --------- --------- --------- ---------
Operating income............................... 177 217 156 116 338 338
Interest expense, net.............................. 7 13 8 12 78 86
--------- --------- --------- --------- --------- ---------
Earnings before income taxes................... 170 204 148 104 260 252
Income tax expense................................. -- -- 2 5 -- --
--------- --------- --------- --------- --------- ---------
Net earnings..................................... $ 170 $ 204 $ 146 $ 99 $ 260 $ 252
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Pro forma to reflect income taxes:
Income tax expense............................... $ 67 $ 80 $ 58 $ 41 $ 104 $ 97
Net earnings..................................... $ 103 $ 124 $ 90 $ 63 $ 156 $ 155
Net earnings per share........................... $ 0.03 $ 0.04 $ 0.03 $ 0.02 $ 0.05 $ 0.05
</TABLE>

Although the Company's historical and anticipated growth makes predicting
future trends difficult, the Company-owned restaurants have generally
experienced slightly lower restaurant sales in the fourth quarter.

LIQUIDITY AND CAPITAL RESOURCES

The Company requires capital primarily for the development of new
restaurants, possible acquisitions and the remodeling of existing Company-owned
restaurants. Capital expenditures totaled $584,000, $285,000 and $475,000 for
1993, 1994 and 1995, respectively, and $1.2 million for the period ended June
30, 1996. The Company has historically funded its capital expenditures with cash
provided by operations and bank borrowings. Net cash provided by operating
activities was $192,000, $696,000 and $777,000 for 1993, 1994 and 1995,
respectively, and $1.0 million for the period ended June 30, 1996.

At June 30, 1996, the Company had outstanding bank borrowings of $3.8
million consisting of (i) $2.5 million under the Loan Agreement which bears
interest at the prime rate plus 1.0% and matures on December 28, 2000, (ii)
aggregate outstanding borrowings under the Term Notes of $800,000, each of which
bear interest at the prime rate plus 0.5% and have a maturity date of June 15,
2003 and (iii) $487,000 under the Nashville Note which bears interest at the
prime rate plus 0.5% and matures

21
<PAGE>

on March 26, 2003. Subsequent to June 30, 1996, the Company has incurred, or
anticipates incurring, additional bank borrowings to finance capital
expenditures of up to $747,500, consisting of (i) $300,000 under the Stillwater
Note which bears interest at the prime rate plus 0.5% and matures on January 10,
2007, (ii) $125,000 under the Springfield Note which bears interest at the prime
rate plus 0.5% and matures on October 8, 2001, (iii) $172,500 under the Remodel
Note which bears interest at the prime rate plus 0.5% and matures on July 8,
2001, and (iv) $150,000 under the Lubbock Note which bears interest at the prime
rate plus 0.5% and matures on October 15, 2003. The outstanding indebtedness
under these bank financings, which is secured by substantially all of the assets
of the Company, will be repaid from the proceeds of this offering. See "Use of
Proceeds."

Certain Prior Entities paid cash distributions to their stockholders in the
aggregate amounts of approximately $394,000 and $2.5 million during 1994 and
1995, respectively. The distributions made in 1995 were in excess of the
earnings of such Prior Entities and were partially funded by borrowings under
the Loan Agreement. The Company also intends to use a portion of the net
proceeds of this offering to fund a distribution to the existing stockholders in
connection with their estimated federal and state income tax obligations
attributable to the Company's 1996 earnings prior to the Termination Date. See
"S Corporation Distributions."

Based on its contemplated expansion plans, the Company estimates that its
total capital expenditures will be approximately $3.0 million in 1996 and $3.2
million in 1997. These estimates include the estimated costs of developing new
restaurants and renovating Company-owned restaurants. The Company expects that
the net proceeds of this offering and cash provided by operating activities will
provide sufficient funds to finance its capital expenditures through 1997.

INFLATION

The Company believes that the relatively moderate rates of inflation over
the past few years have not had a significant impact on its results of
operations.

22
<PAGE>
BUSINESS

GENERAL

The Company owns and franchises 50 quick-service New York Bagel restaurants
in 16 states that serve generous portions of fresh, high quality food with fast,
friendly service at an attractive price-value relationship. The Company has
grown by developing Company-owned restaurants and by selectively adding
franchisees. As of June 30, 1996, there were 20 Company-owned restaurants
located in Oklahoma, Kansas, Tennessee and Texas and 30 franchised restaurants
located in 15 states operated by 20 franchisees.

The Company believes that consumption of bagels has increased in recent
years, as consumers have discovered that bagels are a healthier, lower fat
alternative to other quick-service foods and are a suitable substitute for
sandwich breads. Management believes that the market for retail bagel
restaurants is fragmented and underserved, and that the Company can capitalize
on the demand for fresh bagels by expanding the New York Bagel concept in
targeted markets.

THE NEW YORK BAGEL CONCEPT

PREPARE FRESH, HIGH QUALITY PRODUCTS. New York Bagel restaurants serve up
to 20 varieties of bagels that are made from scratch, boiled and baked
throughout the day in the traditional "New York style." The Company believes its
five-ounce bagel is larger than those served by many of its competitors. Menu
items are prepared in accordance with the Company's specifications using high
quality ingredients such as Philadelphia-Registered Trademark- Brand cream
cheese, Kraft-Registered Trademark- cheeses and premium deli meats. Generous
portions of cream cheese are applied on its breakfast bagel and four ounces of
meat are served on each of its deli sandwiches. The Company believes that the
quality and portion size of its menu items generally equals or exceeds those of
its competitors. Because its menu pricing is competitive, the Company believes
that it offers customers an attractive price-value relationship.

MAXIMIZE TRAFFIC THROUGHOUT THE DAY. Management has recognized the
versatility of the bagel and has developed a menu to attract customers
throughout the day. The breakfast menu at New York Bagel restaurants includes a
variety of bagels and custom-blended cream cheeses, breakfast sandwiches on
bagels, gourmet coffees, muffins and croissants. Lunch and dinner items include
a wide range of delicatessen sandwiches made on bagels or other breads, salads,
cookies and soft drinks. Management believes that Company-owned restaurants
typically generate approximately 40% of their sales before 11:00 a.m., with an
average ticket of approximately $3.00 during such period and $4.00 thereafter.

COMMITMENT TO TIMELY SERVICE. The Company believes that timely service is
essential in the quick-service restaurant business. Service time is minimized
through the division of employee functions, efficient store layout and design
and queuing mechanisms. The Company conducts time studies of its restaurants on
a periodic basis and believes that on average, breakfast customers are served
within three minutes of placing their order and lunch and dinner customers are
served within five minutes. As a result, the Company also has been able to
successfully operate drive-through windows at certain New York Bagel
restaurants.

FOCUS ON TRAINING. The Company believes that comprehensive training is
essential to the efficiency and consistency of its operations. Accordingly, the
Company conducts an extensive 90-day training program for its restaurant
managers and franchisees that is composed of approximately ten days of classroom
instruction and approximately 80 days of on-site instruction. In addition, the
Company's training team provides on-site assistance during the initial ten days
of operation at each Company-owned restaurant and at a franchisee's initial
franchised restaurant.

23
<PAGE>
EXPANSION STRATEGY

EMPHASIZE MID-SIZED AND SMALLER METROPOLITAN MARKETS. The Company presently
targets its expansion efforts in mid-sized and smaller metropolitan markets.
Management believes that these markets are attractive because they typically
have fewer competing bagel restaurants and more favorable lease and labor
environments than larger metropolitan markets.

ESTABLISH STRONG MARKET PRESENCE. Since the bagel industry is highly
fragmented and increasingly competitive, the Company seeks to establish a strong
market presence in its targeted markets. To develop a strong market presence
rapidly and efficiently, the Company employs a multiple store strategy involving
a bakery restaurant which produces bagels for itself and one or more nearby
satellite restaurants. By entering underserved markets and opening multiple
restaurants, the Company seeks to maximize market share and establish brand
awareness. The Company and its franchisees have implemented this
bakery/satellite restaurant combination 15 times.

FOCUS ON UNIT AND MARKET ECONOMICS. Consistent with its market share
objective, the Company focuses not only on generating attractive unit level
economics, but also on the economic returns of a particular target market. The
Company believes that bakery restaurants can be opened for an initial
investment, including leasehold improvements, furniture, fixtures, equipment,
initial working capital and pre-opening expenses, of approximately $250,000,
with satellite restaurants requiring approximately $150,000. By averaging these
initial investment amounts within markets, the Company believes it achieves
attractive returns on investment.

MAINTAIN BALANCED RESTAURANT DEVELOPMENT. The Company intends to expand
through a balanced development of Company-owned and franchised New York Bagel
restaurants. While Company-owned restaurants provide the Company with greater
revenues and profits than franchised restaurants, franchising allows the Company
to accelerate its expansion and name recognition with less investment of the
Company's capital or human resources.

MAKE SELECTIVE ACQUISITIONS. The Company has acquired two bagel restaurants
to date, including an unaffiliated restaurant in Nashville, Tennessee, a new
market, and a franchised restaurant in an existing market. Since acquiring the
Nashville restaurant, a bakery restaurant, the Company has added three satellite
restaurants in that market. The Company intends to pursue other acquisitions of
local and regional bagel operations with an established market presence.

RESTAURANT DESIGN AND SITE SELECTION

The Company's prototypical restaurant is decorated in rich colors and dark
woods and contains a mixture of booth, table and barstool seating and, where
available, outdoor seating. Exposed ceilings with drop lighting and a
combination of tile and carpeted flooring are used to enhance its comfortable
ambiance. Walls are covered with black and white photographs depicting classic
New York scenes. The Company's restaurants are configured to facilitate a smooth
flow of dine-in and carry-out traffic while retaining a casual, cafe atmosphere.
Bagels and other baked products are displayed prominently behind a glass counter
while other items such as salads, packaged cream cheese for take-out and
specialty sodas and drinks are located in an open, self-serve refrigerated area
next to the cash register. Restaurant staff prepare sandwich and other menu
items behind the counter for dine-in and take-out customers. Dine-in customers'
food is delivered directly to the table. The restaurants serve cappuccino and
espresso, and a fountain drink and gourmet coffee station are placed in the
dining area for customer convenience. Retail merchandise, including New York
Bagel logo clothing, coffee mugs and gift items, are displayed throughout the
restaurant.

The Company believes that the layout and design of each restaurant
contributes to the success of its operations. The Company continually reviews
the restaurant design package for its restaurants and remodels as required.
Pursuant to the franchise agreement, franchised restaurants' decor must

24
<PAGE>
be updated every five years or upon renewal of each particular franchise
agreement. Remodeling typically requires closing the restaurant for one to four
weeks. Although restaurants may vary in size, layout and design are generally
consistent.

The Company considers the location of a restaurant to be important, and,
therefore, devotes significant resources to the investigation and evaluation of
potential sites. The site selection process focuses on area demographics,
including population density, traffic patterns, income levels and competitive
factors. The Company generally targets locations that possess a population
density of at least 50,000 residents within a three mile radius and are situated
on the morning side of commuter traffic. The Company's restaurants are typically
located in strip shopping centers or free-standing buildings that provide
visibility, curb appeal and accessibility. Certain limited hour satellite
restaurants are located in office buildings and are open during business hours
Monday through Friday. The Company's restaurant design may be configured to fit
a wide variety of building shapes and sizes, thereby increasing the number of
suitable sites for new locations.

UNIT ECONOMICS

In targeted markets, the Company employs a multiple store strategy involving
a bakery restaurant which produces bagels for itself and one or more nearby
satellite restaurants. The Company's approach to opening new restaurants has
been to minimize its required investment by leasing substantially all of its
locations. The Company believes that bakery restaurants can be opened for an
initial investment, including leasehold improvements, furniture, fixtures,
equipment, initial working capital and pre-opening expenses, of approximately
$250,000, with satellite restaurants requiring approximately $150,000. By
averaging these initial investment amounts within a particular market, the
Company believes it achieves attractive returns on investment within markets.

During 1995 and the period ended June 30, 1996, average sales per
Company-owned restaurant opened throughout each period were $559,000 and
$293,000, respectively. During 1995 and the period ended June 30, 1996, the
Company's restaurant level cash flow margin (defined as sales from Company-owned
restaurants less cost of sales and restaurant operating expenses as a percentage
of sales from Company-owned restaurants) was 17.1% and 18.9%, respectively.

RESTAURANT LOCATIONS

The average bakery restaurant contains approximately 2,750 square feet, and
the average satellite restaurant contains approximately 2,000 square feet.
Approximately 1,200 square feet of a bakery restaurant is used for dough
production, baking and food preparation while approximately 500 square feet of a
satellite restaurant is used for food preparation. Restaurants have an average
seating capacity of approximately 60 persons. The Company leases approximately
1,200 to 4,000 square feet of space for each of its 20 Company-owned restaurant
sites. As of June 30, 1996, the Company has entered into an agreement to
purchase land and a building under development as a restaurant and leases for
three restaurants under development. Although the terms of its leases for
Company-owned restaurants vary, the Company typically seeks to obtain an initial
five-year term lease with two or three five-year option terms. The following
table sets forth certain information as of June 30, 1996 with respect to
Company-owned and franchised New York Bagel restaurants currently in operation
or under development. Restaurants under development include locations for which
leases have been signed, a real estate purchase agreement has been executed, or
construction has commenced, but are not currently in operation.

25
<PAGE>
COMPANY-OWNED RESTAURANTS

<TABLE>
<CAPTION>
DATE TYPE OF
LOCATION OPENED RESTAURANT
- ------------------------------------------------------------ ------------------------ -----------
<S> <C> <C> <C>
Stillwater, OK Elm Street January 1986 Bakery
Stillwater, OK Downtown August 1986 Satellite
Oklahoma City, OK Casady Square August 1988 Bakery
Oklahoma City, OK Leadership Square October 1989 Satellite
Tulsa, OK Yale and 71st Street January 1990 Bakery
Edmond, OK Broadway Extension September 1991 Satellite
Wichita, KS East Central Avenue July 1992 Bakery
Wichita, KS Downtown April 1993 Satellite
Oklahoma City, OK Brixton Square July 1993 Satellite
Tulsa, OK Cherry Street January 1994 Satellite
Norman, OK Lindsey Avenue August 1994 Bakery
Norman, OK Campus September 1994 Satellite
Wichita, KS Rock Road July 1995 Satellite
Tulsa, OK Peoria Avenue September 1995 Bakery
Nashville, TN West End Avenue December 1995 Bakery
Nashville, TN Hillsboro Village March 1996 Satellite
Tulsa, OK Downtown March 1996 Satellite
Waco, TX West Waco Drive April 1996 Bakery
Nashville, TN White Bridge Road April 1996 Satellite
Nashville, TN L&C Tower June 1996 Satellite
Springfield, MO Campbell Avenue Under Development Bakery
Tulsa, OK 51st Street Under Development Satellite
Stillwater, OK Perkins Road Under Development Satellite
Lubbock, TX Quaker Avenue Under Development Bakery
</TABLE>

26
<PAGE>

<TABLE>
<S> <C> <C> <C>
FRANCHISED RESTAURANTS
<CAPTION>

DATE TYPE OF
LOCATION OPENED RESTAURANT
- ------------------------------------------------------------ ------------------------ -----------
<S> <C> <C> <C>
Omaha, NE South 106th December 1993 Bakery
Knoxville, TN Kingston Pike March 1994 Bakery
Olathe, KS Mur-len Avenue July 1994 Bakery
Dallas, TX Lemmon Avenue July 1994 Bakery
Kansas City, MO Downtown September 1994 Satellite
Austin, TX Research Boulevard October 1994 Bakery
Little Rock, AR Markham Avenue November 1994 Bakery
Tucson, AZ East Broadway February 1995 Bakery
Omaha, NE Farnam Street February 1995 Satellite
Santa Fe, NM St. Michaels Boulevard March 1995 Bakery
Littleton, CO West Bowles Avenue April 1995 Bakery
Plano, TX Legacy Drive April 1995 Bakery
Dallas, TX Preston Royal Centre May 1995 Satellite
Amarillo, TX Soncy Road June 1995 Bakery
Knoxville, TN Gay Street July 1995 Satellite
Longview, WA Ocean Beach Highway July 1995 Bakery
Columbia, SC Harden Street September 1995 Bakery
Tampa, FL North Dale Mabry Highway September 1995 Bakery
Hurst, TX Grapevine Highway September 1995 Bakery
Bismarck, ND East Bismark Expressway October 1995 Bakery
San Antonio, TX Embassy Oaks November 1995 Bakery
Austin, TX Research Boulevard November 1995 Satellite
Amarillo, TX West Georgia Street December 1995 Satellite
Omaha, NE Pacific Street January 1996 Satellite
Irving, TX North MacArthur Boulevard March 1996 Satellite
New Orleans, LA Veteran's Boulevard March 1996 Bakery
Tucson, AZ North Oracle Avenue March 1996 Satellite
San Antonio, TX Broadway Avenue May 1996 Satellite
Englewood, CO Holly Street June 1996 Bakery
Birmingham, AL 20th Street South June 1996 Bakery
Little Rock, AR Center Street Under Development Satellite
Littleton, CO Wadsworth Avenue Under Development Satellite
Aurora, CO East Mississippi Street Under Development Satellite
Columbia, SC Palmetto Plaza Under Development Satellite
</TABLE>

PLANNED EXPANSION

The Company intends to expand through the balanced development of
Company-owned and franchised restaurants. Since January 1, 1996, the Company has
opened five Company-owned restaurants and currently plans to open eight to ten
additional Company-owned restaurants during the remainder of 1996 and
approximately 17 to 20 in 1997. Since January 1, 1996, franchisees have opened
seven franchised restaurants and the Company currently has 20 franchisees
operating 30 restaurants in 15 states. The Company considers franchisees to be
an integral component of its continued growth. The Company expects franchisees
to open an additional 15 to 20 restaurants during the remainder of 1996 and
approximately 25 to 30 franchised restaurants during 1997, although there can be
no assurance that all of these restaurants will be opened.

27
<PAGE>
OPERATIONS

RESTAURANT PERSONNEL. A typical New York Bagel restaurant employs a
restaurant manager, an assistant manager and approximately 25 to 30 hourly
employees for a bakery restaurant and 15 to 20 hourly employees for a satellite
restaurant, most of whom work part-time. The restaurant manager is responsible
for the day-to-day operation of the restaurant and for compliance with
Company-established operating standards. The Company also employs five area
managers, each of whom has responsibility for overseeing three to six
Company-owned restaurants. The Company seeks to hire experienced restaurant
managers and staff, and to motivate and retain them by providing opportunities
for advancement and performance-based, financial incentives. Training and
compensation programs are intended to instill restaurant managers and area
managers with a sense of ownership in their restaurants. The Company believes
the issuance of stock awards under its 1996 Incentive Plan and the restaurant
management bonus program will enhance its ability to attract and retain
restaurant and area managers. To date, the Company has experienced a low
managerial turnover rate which it believes results in decreased training costs
and higher productivity. See "Management -- 1996 Incentive Plan."

REPORTING. The Company's restaurant managers prepare daily and weekly
reports of sales, cash deposits and operating costs. Physical inventories of all
food and beverage items are taken monthly. The Company conducts monthly meetings
with area managers to discuss restaurant sales, profitability and operations,
personnel needs and product quality.

HOURS OF OPERATIONS. The restaurants are generally open Monday through
Saturday from 6:30 a.m. to 8:00 p.m. and on Sunday from 8:00 a.m. to 5:00 p.m.
Management believes that Company-owned restaurants typically generate
approximately 40% of their sales before 11:00 a.m. Although the majority of New
York Bagel restaurants are open seven days a week, certain satellite restaurants
are located in downtown business districts and are open during business hours
Monday through Friday.

TRAINING

The Company believes that comprehensive training is essential to the
efficiency and consistency of its restaurants. Accordingly, the Company conducts
an extensive 90-day training program for its restaurant managers and franchisees
that is composed of approximately ten days of classroom instruction on
administration, record keeping and inventory control and approximately 80 days
of on-site instruction on baking and food preparation at the Company's training
facility in Oklahoma City, Oklahoma. The Company has a team of five employees
dedicated to training and new restaurant openings, including a full-time
coordinator. In addition, the team provides on-site assistance during the
initial ten days of operation at each Company-owned restaurant and at a
franchisee's initial franchised restaurant. Management believes that its
emphasis on training currently exceeds that of many of its competitors.

PURCHASING AND DISTRIBUTION

The Company establishes quality standards and specifications for food
products and equipment used in New York Bagel restaurants and designates primary
and secondary suppliers for all food items and restaurant supplies. In order to
ensure product quality and consistency, franchisees purchase certain products
from the Company's approved distributors. To obtain competitive prices, the
Company contracts centrally for certain food products and supplies and
negotiates volume discounts for the benefit of Company-owned and franchised
restaurants. Most Company-owned and franchised restaurants purchase the majority
of their food and non-food items from one nationally recognized distributor. The
Company believes that the loss of this distributor would not materially affect
the Company's results of operations.

28
<PAGE>
MARKETING AND ADVERTISING

The Company and its franchisees advertise through newspapers, direct mail
and radio. All advertising materials must be produced or pre-approved by the
Company. The Company provides restaurants with pre-opening, grand opening and
ongoing advertising and in-store promotional materials. In April 1996, the
Company and its franchisees commenced payments of 0.5% of gross sales to the
Company's advertising fund. The advertising fund is governed by a six-member
board comprised of three Company representatives and three franchisee
representatives who oversee the development of advertising materials. Prior to
April 1996, the Company funded the development of advertising materials and
furnished such materials to all restaurants for their use. Franchisees maintain
sole discretion over the placement of advertisements in their market.

FRANCHISE PROGRAM

The Company commenced franchising its restaurant concept in 1993 and
currently has 20 franchisees operating 30 New York Bagel restaurants in 15
states. The Company expects that 45 to 50 franchised restaurants will be open by
the end of 1996 and 70 to 80 by the end of 1997. However, there can be no
assurance that all of these restaurants will be open or that the development
schedule set forth in each development agreement will be achieved. During April
1996, a franchisee in the Houston, Texas market closed two restaurants. The
Company anticipates refranchising the Houston, Texas market in the future.
During July 1996, the Company agreed to purchase certain restaurant operating
equipment of its existing Kansas City area franchisee. The Company anticipates
refranchising the Kansas City market in the future.

The Company primarily seeks franchisees that have restaurant experience and
that will enter into development agreements for multiple restaurants.
Franchisees are approved on the basis of operational experience and financial
resources. If the franchisee is not an owner-operator, the Company encourages
the franchisee to provide the full-time operator an equity interest in the
franchise operation.

DEVELOPMENT AGREEMENT. The Company enters into a development agreement with
each franchisee (a "Development Agreement") for the exclusive development of a
predetermined number of New York Bagel restaurants within a designated market
area (the "Area of Exclusivity"). The Area of Exclusivity is negotiated prior to
the signing of a Development Agreement and varies by agreement as to size,
number of New York Bagel restaurants required and the schedule for restaurant
development and opening. A Development Agreement generally requires a franchisee
to develop the first restaurant within 12 months of signing the Development
Agreement and the second restaurant within 18 months. Subsequent restaurants are
generally required to be opened in six-month intervals thereafter. Development
schedules vary based upon the size of the territory and the number of
restaurants to be developed. Development Agreements contain cross-default
provisions, and failure to develop the restaurants on schedule may result in a
loss of exclusivity within the Area of Exclusivity. Under the Company's
Development Agreement, the franchisee is required to pay, at the time of
signing, a non-refundable fee equal to one-third of the initial franchise fee
per restaurant covered by the Development Agreement. The amount is credited
against the Company's standard franchisee fee, the remainder of which is payable
to the Company upon signing the franchise agreement for a specific location.

FRANCHISE AGREEMENT. After signing a Development Agreement, the Company
enters into a franchise agreement (a "Franchise Agreement") generally when a
franchisee secures a location. The Franchisee Agreement provides for a term of
ten years with one ten-year renewal option and contains cross-default
provisions. The Company has the right to terminate any Franchise Agreement under
certain specified circumstances, including a franchisee's failure to make
payments when due or failure to adhere to the Company's standards or procedures.
Many state franchise laws limit the ability of a franchisor to terminate or
refuse to renew a franchise. The current Franchise Agreement contains a right of
first refusal for the Company to purchase an interest in the franchise and the
franchisee. The

29
<PAGE>
current Franchise Agreement provides for an initial franchise fee of $21,000 for
each bakery restaurant and $12,000 for each satellite restaurant. During 1995,
the initial franchisee fees for a bakery restaurant and a satellite restaurant
were $18,000 and $9,000, respectively. Under the current Franchise Agreement,
the franchisee pays the Company a monthly royalty fee of 4% of gross sales. Upon
renewal of the Franchisee Agreement, the monthly royalty fee cannot be increased
to an amount greater than the monthly royalty fee then in effect for new
franchisees. See "Business -- Government Regulation."

SERVICES. The Company assists each franchisee in the site selection and
development of restaurants and provides the physical specifications and plans
for each franchised location. Each franchisee is responsible for recommending
the location for its restaurants, but must obtain Company approval of each
restaurant design and each location based on Company requirements. Company
personnel also visit each site in connection with the site approval process. The
Company provides standard design plans and equipment layout and specifications
for most franchisees. In addition, Company personnel provide telephone support
with respect to operations issues, as well as ongoing assistance with
advertising and promotion.

QUALITY CONTROL. All franchisees are required to operate their New York
Bagel restaurants in compliance with the Company's policies, standards and
specifications, including matters such as menu items, ingredients, materials,
supplies, fixtures, furnishings, decor and signage. Each franchisee has full
discretion, however, to determine the prices to charge its customers. The
Company collects sales and other operating information from its franchisees on a
monthly, quarterly and annual basis. The Company monitors each franchisee's
operations and product quality through review of monthly paperwork, review of
quarterly financial statements and quarterly field visits. These overview
mechanisms allow the Company to quickly identify potential problems and provide
operational, marketing or accounting assistance.

FRANCHISE TRAINING AND SUPPORT. Each franchisee is required to have a
restaurant manager, approved by the Company, who satisfactorily completes the
Company's training program and who devotes his or her full business time and
efforts to the operation of the franchisee's restaurant. In addition to this
program, the Company also provides an on-site training crew for ten days during
the opening of the franchisee's initial restaurant and ongoing supervision
thereafter. Multi-unit franchisees are encouraged to hire a full-time training
coordinator to train new employees for their restaurants. The Company regularly
communicates with its franchisees, and encourages active communication among its
franchisees, through franchise newsletters, special bulletins and periodic
meetings.

GOVERNMENT REGULATION

The Company is subject to various federal, state and local laws affecting
its business. Each of the Company's restaurants is subject to licensing and
regulation by a number of governmental authorities, which include health,
safety, sanitation, building and fire agencies in the state or municipality in
which the restaurant is located. Difficulties in obtaining or failures to obtain
required licenses or approvals could delay or prevent the opening of a new
restaurant in a particular area.

The Company is subject to Federal Trade Commission ("FTC") regulation and
various state laws which regulate the offer and sale of franchises. Several
state laws also regulate substantive aspects of the franchisor-franchisee
relationship. The FTC requires the Company to furnish to prospective franchisees
a franchise offering circular containing prescribed information. The Company is
currently required to register as a franchisor in two states. A number of states
in which the Company may consider franchising also regulate the sale of
franchises and require registration of the franchise offering circular with
state authorities. Substantive state laws that regulate the
franchisor-franchisee relationship presently exist in many states, and bills
have been introduced in Congress from time-to-

30
<PAGE>
time which would provide for Federal registration of the franchisor-franchisee
relationship in certain respects. The state laws often limit, among other
things, the duration and scope of non-competition provisions and the ability of
a franchisor to terminate or refuse to renew a franchise.

The Company's operations are also subject to federal and state laws
governing such matters as wages, working conditions, citizenship requirements
and overtime. The Company is also subject to the Americans with Disabilities Act
of 1990, which, among other things, could require certain renovations to its
restaurants to meet federal mandates. If such renovations are required, the
Company believes the cost thereof will not materially affect the Company's
results of operations. The Company believes it is in substantial compliance with
all material laws.

COMPETITION

The quick-service restaurant industry is intensely competitive and generally
characterized by low barriers to entry. There are a growing number of
significant national, regional and local bagel restaurant chains, operating both
owned and franchised bagel restaurants including Quality Dining, Inc. (Brueggers
Bagel Bakery), Einstein/Noah Bagel Corp., Manhattan Bagel Company, Inc. and BAB
Holdings, Inc., many of which have greater financial resources than the Company.
New York Bagel restaurants also compete with other well established
quick-service restaurants that have greater product and name recognition, larger
financial and other resources than the Company and longer operating histories,
as well as numerous local food establishments, supermarkets and convenience
stores that offer similar products. The Company believes that New York Bagel
restaurants compete favorably in terms of taste, food quality, portions,
service, convenience and value, which the Company believes are important factors
to its targeted customers.

The Company competes for qualified franchisees with a wide variety of
investment opportunities both in the restaurant business and in other
industries. The Company's continued success is dependent to a substantial extent
on its reputation for providing high quality and value with respect to its
service, products and franchises, and this reputation may be affected not only
by the performance of Company-owned restaurants, but also by the performance of
its franchised restaurants over which the Company has limited operational
control.

TRADEMARKS AND SERVICE MARKS

The Company operates and franchises bagel restaurants under the names "New
York Bagel Shop & Delicatessen," "New York Bagel Shop & Deli," "NY Bagel Cafe,"
"New York Bagel Cafe & Deli," "NYB New York Bagel," "the New York Bagel Shop"
and "Nashville Bagel Co." The Company's trademark "New York Bagel Shop &
Delicatessen" and service mark "Like Bread With An Attitude" are registered
under applicable federal trademark law. Under federal trademark law, the Company
is required to renew these marks every 20 years. The Company claims common-law
rights to the marks "New York Bagel Shop & Delicatessen," "NYB," "The City's
Best Bagel," and "Where Yeast Meets West," but there have been no judicial
determinations of the existence, validity, or extent of the Company's rights.
Certain of the marks are licensed by the Company to franchisees pursuant to
franchise agreements.

The Company is aware of the use by other persons and entities in certain
geographic areas of names and marks which are the same or similar to the
Company's marks. Some of these persons or entities may have prior rights to
those names or marks in their respective localities. Therefore, there is no
assurance that the "New York Bagel Shop & Delicatessen" mark or any other marks
are available in all locations.

PROPERTIES

The Company's principal executive offices are located at 300 I.M.A. Plaza,
250 North Water Street, Wichita, Kansas 67202-1213, where the Company subleases
approximately 1,200 square feet of office space pursuant to a sublease agreement
with Murfin Drilling Company, Inc., a wholly owned subsidiary of Murfin, Inc.,
that expires during March 1997. The Company has the option to terminate

31
<PAGE>
such sublease upon 30 days' notice. Mr. David L. Murfin, a Director of the
Company, is a 7.1% stockholder of Murfin, Inc. The Company believes that
alternative office space is available at comparable rates from third parties.
The Company's operational offices are located at 110 West Third Street,
Stillwater, Oklahoma 74074, where the Company leases approximately 900 square
feet of office space pursuant to a lease agreement that expires during December
1997. The Company conducts its management and franchisee training at its Casady
Square, Oklahoma City, Oklahoma facility in an approximately 3,400 square foot
space contiguous to the restaurant. Such facility is subject to a lease that
expires during July 2003. The Company believes that its current executive
offices and training facilities are adequate for the near future and does not
anticipate the need for significant expansion of these facilities in the
foreseeable future. See "Certain Transactions -- Leases."

EMPLOYEES

As of June 30, 1996, the Company employed 362 persons, 202 of which are
employed part-time. None of the Company's employees is subject to any collective
bargaining agreements, and management considers its relations with its employees
to be good.

LEGAL PROCEEDINGS

The Company is involved from time-to-time in various legal proceedings and
claims incident to the normal conduct of its business. The Company believes that
such legal proceedings and claims, individually and in the aggregate, are not
likely to have a material adverse effect on its financial condition or results
of operations.

32
<PAGE>
MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The names of the directors, executive officers and key employees of the
Company and their respective ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Robert J. Geresi (1)......................... 34 Chairman of the Board, Chief Executive Officer and
President
Paul T. Sorrentino (2)....................... 34 Vice President -- New Store Development and
Director
Paul R. Hoover (1)........................... 35 Vice President -- Strategic Planning and Director
J. Chris Dennis.............................. 32 Chief Financial Officer, Secretary and Treasurer
Vincent J. Vrana............................. 33 Vice President -- Training
Markus K. Scholler........................... 41 Director of Franchise Operations
William S. Atherton (3)(4)................... 63 Director
David L. Murfin (2)(4)....................... 44 Director
</TABLE>

- ------------------------
(1) Class III Director.
(2) Class II Director.
(3) Class I Director.
(4) Member of the Audit Committee and the Compensation Committee.

ROBERT J. GERESI has served as Chairman of the Board, Chief Executive
Officer and President of the Company since December 1995. Mr. Geresi served as
an executive officer of each Prior Entity since their respective inceptions
beginning in 1986. From 1984 through 1986, Mr. Geresi served as a Senior
Financial Analyst of Grumman Aerospace Corp., Bethpage, New York. Since 1995,
Mr. Geresi has served as a director of Cowboy Land Development, Inc., a real
estate subsidiary of Karsten Creek Golf Course, Oklahoma State University
Foundation. Mr. Geresi received a Bachelor of Arts degree in economics from
Binghamton University, Binghamton, New York in 1984.

PAUL T. SORRENTINO has served as Vice President -- New Store Development and
as a Director of the Company since December 1995. Mr. Sorrentino served as an
executive officer of each Prior Entity since their respective inceptions
beginning in 1986. From 1985 to 1986, Mr. Sorrentino was a telecommunications
consultant for Cameron Communications, Oklahoma City, Oklahoma. Mr. Sorrentino
received a Bachelor of Arts degree in advertising from Oklahoma State
University, Stillwater, Oklahoma in 1985.

PAUL R. HOOVER has served as Vice President -- Strategic Planning and as a
Director of the Company since December 1995. From June 1994 until December 1995,
Mr. Hoover served as Vice President and as a Director of New York Bagel
Enterprises, Inc., the franchisor entity of the Prior Entities. Since 1984, Mr.
Hoover has been a Director and stockholder of West-Kan Foods, Inc., a Wendy's
restaurant franchisee. From 1986 to 1990, Mr. Hoover was President of Midco
Foods, Inc., a multi-concept restaurant franchisee. Mr. Hoover is the owner of
and has served as the President of Paul R. Hoover Real Estate Company since
1990. Mr. Hoover received a Bachelor of Arts degree in geology from Wichita
State University, Wichita, Kansas in 1983.

J. CHRIS DENNIS has served as Chief Financial Officer, Secretary and
Treasurer of the Company since April 1996. From 1991 to 1996, Mr. Dennis was
Vice President and Controller of Railroad Savings Bank fsb in Wichita, Kansas
and its parent company, Railroad Financial Corporation, a

33
<PAGE>
publicly-held financial institution. From 1986 to 1991, Mr. Dennis was an audit
supervisor with Grant Thornton LLP, certified public accountants. Mr. Dennis is
a member of the American Institute of Certified Public Accountants and Kansas
Society of Certified Public Accountants, and currently serves on the Planning
Committee of the Annual Wichita State University Accounting and Auditing
Conference. Mr. Dennis received a Bachelor of Business Administration degree in
accounting from Wichita State University, Wichita, Kansas in 1985. Mr. Dennis is
a Certified Public Accountant.

VINCENT J. VRANA has served as Vice President -- Training of the Company
since December 1995. Mr. Vrana served as an executive officer of each Prior
Entity since their respective inceptions beginning in 1986. Mr. Vrana received a
Bachelor of Arts degree from Oklahoma State University, Stillwater, Oklahoma in
1986.

MARKUS K. SCHOLLER has served as Director of Franchise Operations of the
Company since October 1994. From 1990 to 1994, Mr. Scholler was Training General
Manager for J.S. Ventures, Inc., a multi-unit Applebee's Neighborhood Grill &
Bar franchisee. From 1986 to 1990, Mr. Scholler was General Manager of Midco
Foods, Inc., a multi-concept restaurant franchisee. Mr. Scholler is a Director
of the Kansas Restaurant and Hospitality Association.

WILLIAM S. ATHERTON has served as a Director of the Company since January
1996. Mr. Atherton is a partner of Atherton & Murphy Investment Company, an
investment partnership, and serves as Chairman of the Board of Atherton
Restaurant Services, Inc. Mr. Atherton also serves as a Director of Wall Street
Deli, Inc., a publicly-traded restaurant company, Chimis, Inc., a full-service
casual dining concept, Oklahoma State University Foundation Board of Governors
and the National Cowboy Hall of Fame. From 1964 until 1986, Mr. Atherton served
as Chairman of the Board and Chief Executive Officer of A & M Food Service,
Inc., a Pizza Hut franchisee. He received a Bachelors of Science degree in
petroleum engineering from Oklahoma State University, Stillwater, Oklahoma in
1956.

DAVID L. MURFIN has served as a Director of the Company since July 1994.
Since 1978, Mr. Murfin has served in various capacities with, and since 1992 as
President of, Murfin Drilling Company, an oil and gas production, exploration
and drilling company. From 1975 to 1978, Mr. Murfin was a Production and
Reservoir Engineer with Amoco Production Company. Mr. Murfin also serves as
National Chairman of the Liaison Committee of Cooperating Oil and Gas
Associations, President of the Kansas Independent Oil and Gas Association, a
director of the International Association of Drilling Contractors, director of
the Quivira Council of the Boy Scouts of America, a member of the Economic
Analysis Panel of the Wichita Chamber of Commerce, and a director of
Heartspring. Mr. Murfin received Bachelors of Science degrees in business
administration and in mechanical engineering from the University of Kansas in
1975.

TERM OF OFFICE

Upon completion of this offering, the Company's Board of Directors will be
divided into three classes (Class I, Class II and Class III) of as equal size as
possible, with the terms of each class expiring in consecutive years so that
only one class is elected in any given year. Directors for each class will be
elected at the annual meeting of stockholders held in the year in which the term
for such class expires and will serve thereafter for a term of three years until
their successors are elected and qualified or their earlier resignation or
removal, except for the initial Class I and Class II directors whose terms
expire in 1997 and 1998, respectively. Vacancies in unexpired terms and any
additional positions created are filled by action of the Board of Directors. The
Board of Directors intends to appoint one additional independent Class I
Director to the Company's Board of Directors during 1996 in order to fill a
current vacancy on the Board of Directors. The executive officers of the Company
are elected annually by the Board of Directors and serve at the discretion of
the Board of Directors until their successors are elected and qualified or their
earlier resignation or removal.

34
<PAGE>
STOCKHOLDERS' AGREEMENTS

In June 1994, Mr. Geresi, the Company's Chairman of the Board and Chief
Executive Officer, Mr. Sorrentino, a Director and Vice President -- New Store
Development, Mr. Vrana, Vice President -- Training, Mr. Hoover, a Director and
Vice President -- Strategic Planning, and Mr. Murfin, a Director of the Company,
entered into a Contract for Sale of Stock which contained agreements among such
stockholders pertaining to the approval of certain actions, management of
NYBE-OK, as defined herein, election of directors, restrictions on the transfer
of stock and preemptive rights. The current directors of the Company were
designated and elected pursuant to this agreement. During January 1996, this
agreement was terminated and the Stockholders' Agreement became effective.

The existing stockholders and the Company are parties to the Stockholders'
Agreement which sets forth certain agreements regarding the management of the
Company. The Stockholders' Agreement provides that Messrs. Geresi, Vrana and
Sorrentino shall designate three persons to stand for election as directors of
the Company and that Ms. Nancy Murfin, Ms. Barbara Murfin Murphy and Messrs.
Hoover, Murfin, Mark A. Moxley, V. Richard Hoover and Philip Faubert shall
designate three persons to stand for election as directors of the Company. All
stockholders who are parties to the Stockholders' Agreement have agreed to vote
their shares in favor of the election of such designees. The Stockholders'
Agreement will automatically terminate three years after the completion of this
offering. Following this offering, the existing stockholders will have voting
control over more than 56.5% of the outstanding Common Stock (approximately
52.8% if the Underwriters' over-allotment option is exercised in full).
Accordingly, the existing stockholders will be able to elect the entire Board of
Directors and otherwise direct the affairs of the Company.

COMMITTEES

The Company's Board of Directors has established an Audit Committee and a
Compensation Committee, both of which are solely comprised of Independent
Directors, as defined herein. The functions of the Audit Committee are to make
recommendations to the Board of Directors regarding the engagement of the
Company's independent accountants and to review with management and the
independent accountants the Company's financial statements, basic accounting and
financial policies and practices, audit scope and competency of accounting
personnel. The functions of the Compensation Committee are to review and
recommend to the Board of Directors the compensation, stock options and
employment benefits of all officers of the Company, to administer the Incentive
Plan, as defined herein, to fix the terms of other employee benefit arrangements
and to make awards under such arrangements. Members of the committees are
appointed annually by the Board of Directors and serve at the discretion of the
Board of Directors until their successors are appointed or their earlier
resignation or removal.

35
<PAGE>
EXECUTIVE COMPENSATION

The following table sets forth the salary and other annual compensation paid
by the Prior Entities during 1995 to the Company's Chief Executive Officer and
each of the other most highly compensated executive officers of the Company
whose annual salary and other annual compensation during such period exceeded
$100,000 (collectively, the "Named Executive Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY(1) COMPENSATION(2)
- --------------------------------------------------------------------------- --------- ----------------
<S> <C> <C>
Robert J. Geresi........................................................... $ 76,750 $ 90,781
Chairman of the Board, Chief Executive Officer and President
Paul T. Sorrentino......................................................... $ 79,750 $ 90,699
Vice President -- New Store Development and Director
Vincent J. Vrana........................................................... $ 46,763 $ 80,846
Vice President -- Training
</TABLE>

- ------------------------
(1) Effective April 1, 1996, these employees' annual salaries are $65,000,
$62,500 and $48,000, respectively.

(2) Consists of (i) amounts reimbursed during 1995 for the payment of taxes of
$74,643, $74,643 and $74,655 for Messrs. Geresi, Sorrentino and Vrana,
respectively, (ii) health and life insurance premium payments on behalf of
such individuals, and (iii) directors' fees paid by certain Prior Entities.

COMPENSATION OF DIRECTORS

Directors who are not also employees of the Company ("Independent
Directors") receive $250 per board meeting attended and $125 per board committee
meeting attended and are reimbursed for out-of-pocket expenses incurred for
attendance at meetings. The Company granted on June 4, 1996, nonqualified stock
options under the Company's 1996 Incentive Plan to purchase 17,500 shares of
Common Stock to each of Messrs. Murfin and Atherton, who are Independent
Directors, at an exercise price equal to 110% and 100%, respectively, of the
price to public set forth on the cover page of this Prospectus. The nonqualified
stock options vest over a period of four years with the initial 20% becoming
exercisable on the six-month anniversary of the grant date and an additional 20%
becoming exercisable on each of the first four anniversaries of the grant date.
While the Company does not have a formal policy concerning the granting of
nonqualified stock options to Independent Directors, the Company may grant such
options to Independent Directors in the future.

1996 INCENTIVE PLAN

SCOPE. The Board of Directors and stockholders of the Company have approved
the New York Bagel Enterprises, Inc. 1996 Incentive Plan (the "Incentive Plan").
The Incentive Plan authorizes the Company to award incentive stock options and
nonqualified stock options to purchase Common Stock and restricted stock to
officers, employees and directors of, and consultants and advisors to, the
Company. The purpose of the Incentive Plan is to attract, retain and motivate
such persons.

The Incentive Plan authorizes the award of 400,000 shares of Common Stock to
be used for incentive stock options, nonqualified stock options or restricted
stock grants, of which options to purchase 271,000 shares of Common Stock have
been granted as of the date of this Prospectus. If an

36
<PAGE>
award made under the Incentive Plan expires, is canceled or is otherwise
terminated, those shares will be available for future awards under the Incentive
Plan. The Incentive Plan will terminate during January 2006.

ADMINISTRATION. The Incentive Plan will be administered by a committee (the
"Committee") which is comprised of directors who are disinterested within the
meaning of Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). Subject to the provisions of the
Incentive Plan, the Committee will have authority to select those officers,
employees, advisors and consultants of the Company to receive awards, to
determine the time or times of receipt, to determine the types of awards and the
number of shares covered by the awards, and to establish the terms, conditions
and provisions of such awards. In making such award determinations, the
Committee may take into account the nature of services rendered by the
recipient, his or her present and potential contribution to the Company's growth
and success, and such other factors as the Committee deems relevant. The
Committee is authorized to interpret the Incentive Plan, to establish, amend and
revoke any rules and regulations relating to the Incentive Plan, to determine
the terms and provisions of any agreements made pursuant to the Incentive Plan
and to make all other determinations that may be necessary or advisable for the
administration of the Incentive Plan.

STOCK OPTIONS. Both incentive stock options and nonqualified stock options
(collectively referred to as "Stock Options") may be granted pursuant to the
Incentive Plan. All Stock Options granted under the Incentive Plan will have an
exercise price per share to be determined by the Committee; provided that the
exercise price per share under each Stock Option shall not be less than the fair
market value of a share of Common Stock at the time the Stock Option is granted
(110% of such fair market value in the case of incentive stock options granted
to a stockholder who owns 10% or more of the Company's outstanding Common
Stock). The maximum term for all Stock Options granted under the Incentive Plan
is ten years (five years in the case of an incentive stock option granted to a
stockholder who owns 10% or more of the Company's outstanding Common Stock).
Moreover, no Stock Options may be granted under the Incentive Plan more than ten
years after the date of its adoption. All Stock Options are nontransferable
other than by will or the laws of descent and distribution or a qualified
domestic relations order, and during an optionee's lifetime may be exercised
only by the optionee or the optionee's guardian or legal representative. Stock
Options are exercisable at such time and in such installments as the Committee
may provide at the time the Stock Option is granted. The Committee may
accelerate the exercisability of any Stock Option at any time. The purchase
price for shares acquired pursuant to the exercise of a Stock Option must be
paid in the manner determined by the Committee. The terms and conditions of
Stock Options relating to their treatment upon termination of the optionee's
employment or association with the Company will be determined at the time the
Stock Options are granted. An optionee is not deemed to be the owner of any
shares of Common Stock subject to any Stock Option until the Stock Option has
been exercised, the Company has issued and delivered the shares to the optionee
and the optionee's name has been entered as a stockholder of record on the books
of the Company. The stock options vest over a period of four years with the
initial 20% becoming exercisable on the six-month anniversary of the grant date
and an additional 20% becoming exercisable on each of the first four
anniversaries of the grant date. In the event of a change in control of the
Company, as defined, awards under the Incentive Plan become exercisable within
60 days of the change in control.

RESTRICTED STOCK. Restricted stock awards are grants of Common Stock made
to officers and employees, subject to conditions established by the Committee.
The terms of a restricted stock award, including the restrictions placed on such
shares and the time or times at which such restrictions will lapse, shall be
determined by the Committee at the time the award is made. Unless the Committee
determines otherwise, holders of restricted stock shall have the right to vote
the shares of restricted stock and to receive all dividends thereon. The
Committee may determine at the time of an award of restricted stock that
dividends paid on such shares may be paid to the grantee or deferred. Deferred
dividends (together with any interest accrued thereon) will be paid upon the
lapsing of the restrictions

37
<PAGE>
on the shares of restricted stock or forfeited upon the forfeiture of the shares
of restricted stock. The agreements evidencing awards of restricted stock shall
set forth the terms and conditions of such awards and the effect of a grantee's
termination of employment.

ADJUSTMENTS. In the event of any change in the outstanding shares of Common
Stock by reason of any reclassification, recapitalization, merger,
consolidation, reorganization, spin-off, split-up, issuance of warrants or
rights or debentures, stock dividend, stock split or reverse stock split, cash
dividend, property dividend or similar change in the corporate structure, the
aggregate number of shares of Common Stock with respect to which awards may be
made under the Incentive Plan, and the terms and the number of shares of
restricted stock, or the number of shares of Common Stock underlying any
outstanding Stock Options may be equitably adjusted by the Committee in its sole
discretion.

TERMINATION AND AMENDMENT. The Incentive Plan may be terminated or amended
by the Board of Directors, provided that, in the absence of stockholder
approval, no amendment of the Incentive Plan may materially increase the total
number of shares of Common Stock with respect to which awards may be made under
the Incentive Plan (except as discussed in "-- Adjustments" above), change the
exercise price of a Stock Option, materially modify the requirements as to
eligibility for participation in the Incentive Plan or materially increase the
benefits accruing to participants under the Incentive Plan. No amendment of the
Incentive Plan may adversely alter or impair any Stock Option or share of
restricted stock awarded under the Incentive Plan prior to such amendment
without the consent of the holder thereof.

INDEMNIFICATION ARRANGEMENTS

The Company's Restated and Amended Articles of Incorporation and Restated
and Amended Bylaws will provide that the Company shall indemnify all directors
and officers of the Company to the fullest extent permitted by the Kansas
general corporation code. Under such provisions, any director or officer, who in
his capacity as such, is made or threatened to be made, a party to any suit or
proceeding, shall be indemnified if it is determined that such director or
officer acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1995, all compensation decisions concerning executive officers were
made by the Company's Board of Directors and the respective boards of directors
of the Prior Entities, which included Messrs. Geresi, Sorrentino, Hoover,
Murfin, Vrana, Trizza, Robert D. Young, Brent E. Durham, John R. Geresi and Chad
E. Watkins. The Compensation Committee currently makes recommendations to the
Board of Directors regarding compensation to the executive officers. See
"Certain Transactions."

38
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table presents certain information as of July 26, 1996, and
after giving effect to this offering, regarding the beneficial ownership of
Common Stock of (i) each director of the Company, (ii) each Named Executive
Officer, (iii) all persons known by the Company to be beneficial owners of five
percent or more of the Common Stock, and (iv) all directors and executive
officers of the Company as a group. Additionally, the table reflects each
Selling Stockholder and the number of shares of Common Stock to be sold by each
in this offering. The persons listed below have sole voting and investment power
and record and beneficial ownership with respect to such shares.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER OFFERING(6)
-------------------------- SHARES --------------------------
NAME NUMBER PERCENTAGE OFFERED(5) SHARES PERCENTAGE
- -------------------------------------------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Robert J. Geresi (1)(2)........................... 599,343 21.4% 48,000 551,343 12.0%
Paul T. Sorrentino (1)............................ 598,543 21.4 48,000 550,543 12.0
Paul R. Hoover (3)(4)............................. 69,348 2.4 5,000 64,348 1.4
Vincent J. Vrana (1).............................. 556,564 19.9 44,000 512,564 11.1
David L. Murfin (3)............................... 438,246 15.7 33,000 405,246 8.8
Directors and executive officers as a group (seven
persons)......................................... 2,262,044 80.8% 178,000 2,084,044 45.3%

5% STOCKHOLDER
Rodney Joe Trizza (1)............................. 161,951 5.8% 10,750 151,201 3.3%

OTHER SELLING STOCKHOLDERS
Brent E. Durham................................... 24,217 * 1,750 22,467 *
John R. Geresi.................................... 21,389 * 500 20,889 *
V. Richard Hoover................................. 69,350 2.5% 2,500 66,850 1.5%
Nancy Murfin Moxley and Mark A. Moxley............ 70,850 2.5 2,500 68,350 1.5
Barbara Murfin Murphy............................. 70,850 2.5 2,500 68,350 1.5
Chad E. Watkins................................... 25,833 * 1,500 24,333 *
</TABLE>

- ------------------------
* Represents beneficial ownership of less than 1%

(1) The address for Messrs. Geresi, Sorrentino, Vrana and Trizza is 110 West
Third Street, Stillwater, Oklahoma 74074-3504.

(2) Includes 5,000 shares owned by Mr. Geresi's minor children.

(3) The address for Messrs. Hoover and Murfin is 300 I.M.A. Plaza, 250 North
Water Street, Wichita, Kansas 67202-1213.

(4) Includes 5,000 shares owned by Mr. Hoover's minor children.

(5) In the event that the Underwriters' over-allotment option is exercised in
full, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and Trizza will sell
an aggregate of 54,500, 54,500, 6,500, 50,500, 38,500 and 13,250 shares,
respectively, in this offering.

(6) In the event that the Underwriters' over-allotment option is exercised in
full, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and directors and
executive officers as a group will beneficially own 544,843 (11.2%), 544,043
(11.2%), 62,848 (1.3%), 506,064 (10.4%), 399,746 (8.2%) and 2,057,544 shares
(42.3%), respectively, following this offering.

39
<PAGE>
CERTAIN TRANSACTIONS

REORGANIZATION

On December 31, 1995, the Company effected the Reorganization whereby,
through a series of transactions, the Company succeeded to the businesses of the
Prior Entities. First, New York Bagel Shop & Delicatessen, Inc., a Kansas
corporation, and VPR, Inc., New York Bagel Shop, Inc., Bagel Boss, Inc. and
Bagels of Norman, Inc., all Oklahoma corporations, were merged into New York
Bagel Enterprises, Inc., an Oklahoma corporation ("NYBE-OK") by issuance of
1,368,704 shares of the Company's Class B Common Stock. Second, Nashville Bagel,
a wholly owned subsidiary of NYBE-OK, was merged into NYBE-OK. Finally, NYBE-OK
was merged into the Company for the purpose of changing the corporate domicile
from Oklahoma to Kansas by issuance of 1,416,988 shares of the Company's Class A
Common Stock to the pre-reorganization stockholders of NYBE-OK. As a result of
the Reorganization, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and Trizza
received 627,343, 627,343, 141,698, 584,564, 354,246 and 161,951 shares of
Common Stock, respectively. In addition, Mr. Geresi's father, John R. Geresi,
received 21,389 shares; Mr. Hoover's father, V. Richard Hoover, received 70,850
shares; Mr. Murfin's sister, Barbara Murfin Murphy, received 70,850 shares; Mr.
Murfin's sister and brother-in-law, Nancy Murfin Moxley and Mark A. Moxley,
received 70,850 shares; and 54,608 shares were issued to others.

FRANCHISE ACQUISITION

On December 31, 1995, the Company acquired the assets of Central & Ridge
Yogurt, Inc. ("C&R"), a franchisee of the Company, in consideration of the
assumption by the Company of $225,000 of liabilities of C&R. The assets, which
had been acquired by C&R over time at a cost of approximately $195,000, were
valued by the Company without benefit of an independent appraisal at $225,000.
At the time of the acquisition, Mr. Hoover was the President of C&R and owned
10% of the stock of C&R. The terms of the transaction were negotiated by Mr.
Hoover on behalf of C&R and Mr. Geresi on behalf of the Company and approved by
the Board of Directors of the Company, with the purchase price being determined
by arm's-length negotiation between C&R and the Company.

LEASES

The Company currently leases space for a Company-owned New York Bagel
restaurant located in Norman, Oklahoma from Bagel Land, Inc. ("Bagel Land"), an
Oklahoma corporation, owned one-third each by Messrs. Geresi, Sorrentino and
Vrana. The Company made aggregate rent payments under such lease of $14,100,
$28,200 and $14,100 during 1994, 1995 and the period ended June 30, 1996,
respectively. The lease is for a term of five years commencing June 1994 at a
rent of $2,350 per month for 30 months and $2,500 per month for the remaining 30
months with an option to renew for five years at $2,650 for the first 30 months
and $2,800 per month for the last 30 months. The Company also leases space for a
Company-owned New York Bagel restaurant located in Tulsa, Oklahoma from Cherry
Street Land, Inc., an Oklahoma corporation, owned one-fourth each by Messrs.
Geresi, Sorrentino, Vrana and Trizza. The Company made aggregate rent payments
under such lease of $27,600 and $13,800 during 1995 and the period ended June
30, 1996, respectively. The lease is for a term of five years beginning January
1995 with an option to renew for five years and rent for the first 24 months of
$2,300 per month, $2,500 per month for the next 36 months, $2,700 per month for
the next 30 months and $2,900 per month for the last 30 months. Bagel Land is
anticipated to lease space to the Company for a New York Bagel restaurant to be
opened in Lubbock, Texas. Bagel Land is anticipated to be paid rent of $3,500
per month commencing during the later part of 1996.

The Company subleases space for its corporate offices located in Wichita,
Kansas from Murfin Drilling Company, Inc., a wholly owned subsidiary of Murfin,
Inc. which is owned 7.1% by Mr. Murfin. The Company made aggregate rent payments
under such sublease of $7,449 and $6,572 during 1995 and the twenty-six week
period ended June 30, 1996, respectively. The current sublease is for a term of
12 months commencing April 1, 1996, and is terminable on 30 days' notice by the
Company.

40
<PAGE>
STOCKHOLDER GUARANTEES

The Loan Agreement is guaranteed in an amount up to $1.0 million by each of
Messrs. Geresi, Sorrentino and Vrana. The Nashville Note is guaranteed by
Messrs. Geresi, Sorrentino and Vrana each up to $83,250 and Messrs. Murfin, up
to $175,000, and Hoover, up to $75,000. The Term Notes, the Stillwater Note, the
Springfield Note, the Remodel Note and the Lubbock Note are guaranteed in an
unlimited amount by Messrs. Geresi, Sorrentino and Vrana and in various limited
amounts by Messrs. Murfin, Hoover and Trizza. The Company intends to use
approximately $4.5 million of the net proceeds of this offering to repay all
outstanding indebtedness under the Loan Agreement, the Nashville Note and the
Term Notes. See "Risk Factors -- Benefits of Offering to Certain Stockholders"
and "Use of Proceeds."

DISTRIBUTIONS

During 1994, the Prior Entities declared distributions in the aggregate of
$614,260 to their stockholders, of which Messrs. Geresi, Sorrentino, Vrana,
Murfin and Hoover received $184,254, $184,254, $184,254, $7,800 and $1,200,
respectively. Mr. Trizza, a 5.8% stockholder of the Company, received $49,498,
$2,400 was received by members of Mr. Murfin's family, and $600 was received by
V. Richard Hoover, the father of Mr. Hoover. During 1995, the Prior Entities
declared distributions in the aggregate of $2,363,030 to their stockholders of
which Messrs. Geresi, Sorrentino, Vrana, Murfin and Hoover received $571,740,
$571,738, $544,838, $225,000 and $90,000, respectively. Mr. Trizza received
$177,252, John R. Geresi, the father of Mr. Geresi, received $13,447, V. Richard
Hoover, the father of Mr. Hoover, received $45,000, $90,000 was received by
members of Mr. Murfin's family, and the balance ($34,015) was paid to other
stockholders of the Prior Entities. The Company intends to make a distribution
to the stockholders in connection with their estimated federal and state income
tax obligations attributable to the Company's 1996 earnings. If the Company had
terminated its S corporation status as of June 30, 1996, the Company's
distribution would have been approximately $184,000. See "S Corporation
Distributions."

FRANCHISEE

During August 1995, the Company entered into a Development Agreement with
Mr. Vrana's brother and his partner concerning the development of three New York
Bagel restaurants in Columbia, South Carolina on terms and conditions comparable
to all other franchisees of the Company as discussed herein. Pursuant thereto,
Mr. Vrana's brother and his partner have developed one restaurant and entered
into a franchise agreement with the Company in connection therewith.

FUTURE TRANSACTIONS

Although each of the foregoing transactions were among affiliated parties
and necessarily involved conflicts of interest, the Company believes that they
were on terms that were no less favorable than reasonably available from
unaffiliated third parties. It is the Company's policy that all transactions
between the Company and its affiliated entities, executive officers or directors
will be subject to the review and approval of the majority of the Company's
directors that do not have an interest in the transaction and will be on terms
which will be no less favorable to the Company than the Company could obtain
from non-affiliated parties.

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of (i) 25,000,000
shares of Class A Common Stock, par value $0.01 per share, and (ii) 5,000,000
shares of Class B Common Stock, par value $0.01 per share. As of June 30, 1996,
there were 1,416,988 shares of Class A Common Stock outstanding held by nine
record holders and 1,383,012 shares of Class B Common Stock outstanding held by
eight record holders.

41
<PAGE>

Concurrently with the completion of this offering, (i) the number of
authorized shares of Class A Common Stock will be increased to 30,000,000, (ii)
each share of outstanding Class B Common Stock will be converted into one share
of Class A Common Stock resulting in the 24 stockholders prior to this offering
holding 2,800,000 shares of Common Stock, (iii) the Class B Common Stock will
cease to exist and the Class A Common Stock will be reclassified as Common
Stock, and (iv) the Company will be authorized to issue 5,000,000 shares of
Preferred Stock, no par value per share.

COMMON STOCK

Holders of Common Stock will be entitled to one vote for each share held in
the election of directors and on all other matters submitted to a vote of
stockholders. Cumulative voting of shares of Common Stock will be prohibited in
the Company's Restated and Amended Articles of Incorporation. Subject to the
preferential rights of the holders of Preferred Stock, holders of Common Stock
will be entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors out of funds legally available therefor. Upon the
liquidation, dissolution or winding up of the Company, the holders of Common
Stock will be entitled to receive ratably the net assets of the Company
available after payment of all debts and other liabilities and payment in full
to holders of shares of Preferred Stock then outstanding, if any, of any amount
required to be paid under the terms of such Preferred Stock. Holders of Common
Stock will have no preemptive, subscription, redemption or conversion rights.
The rights, preferences and privileges of holders of Common Stock will be
subject to, and may be adversely affected by, the rights of any series of
Preferred Stock that the Company may issue in the future. See "Dividend Policy."

PREFERRED STOCK

Upon completion of this offering, the Board of Directors will be authorized
to issue, from time-to-
time without further action by the Company's stockholders, shares of Preferred
Stock, in one or more series, and fix the dividend rights, dividend rates, any
conversion rights or right of exchange, any voting right, rights and terms of
redemption (including sinking fund provisions), the redemption price or prices,
the liquidation preferences and any other rights, preferences, privileges and
restrictions of any series of Preferred Stock and the number of shares
constituting such series and the designation thereof. Depending upon the rights
of such Preferred Stock, the issuance of Preferred Stock could have an adverse
effect on holders of Common Stock by delaying or preventing a change in control
of the Company, diluting the voting rights of holders of Common Stock, making
removal of the present management of the Company more difficult or resulting in
the reduction of or restrictions upon the payment of dividends and other
distributions to the holders of Common Stock, including, without limitation, any
liquidation preferences which may relate to such Preferred Stock.

CLASS B COMMON STOCK

Holders of Class B Common Stock have no voting rights, but otherwise have
the same rights as holders of Common Stock. Concurrently with the completion of
this offering, the outstanding shares of Class B Common Stock will be converted
into shares of Class A Common Stock, which will be reclassified as Common Stock,
and the Class B Common Stock will cease to exist.

CONVERTIBLE DEBENTURE

In connection with the acquisition of Nashville Bagel, the Company issued a
4.0% contingently convertible subordinated debenture in the amount of $115,000
payable in annual installments of $28,750 plus interest beginning December 14,
1996 (the "Convertible Debenture"). The Convertible Debenture is convertible
into a maximum of 19,320 shares of Common Stock, at the option of the holder
thereof, during the period commencing ten days after the completion of this
offering and ending 270 days later. The number of shares of Common Stock
issuable upon conversion are subject to adjustment from time to time in the
event the Company (i) pays a dividend or makes a distribution on the outstanding
Common Stock payable in Common Stock, (ii) subdivides the outstanding Common

42
<PAGE>
Stock into a greater number of shares, (iii) combines the outstanding Common
Stock into a lesser number of shares, or (iv) issues by reclassification of the
Common Stock any Common Stock of the Company. The Convertible Debenture is
subordinate to the liabilities of the Company.

CERTAIN ANTI-TAKEOVER MATTERS

The provisions of the Company's Restated and Amended Articles of
Incorporation and Amended and Restated Bylaws summarized below may be deemed to
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider to be in the best interest of
the Company or its stockholders, including those attempts that might result in a
premium over the market price for the Common Stock.

Upon completion of this offering, the Company's Restated and Amended
Articles of Incorporation will provide for the Board of Directors to be divided
into three classes as of equal size as possible, with the term of each class
expiring in consecutive years. As a result, approximately one-third of the Board
of Directors will be elected each year. The Company's Restated and Amended
Articles of Incorporation will also provide that directors may be removed from
office only for cause. Directors may be removed for cause by the affirmative
vote of the holders of at least two-thirds of the outstanding shares of stock of
the Company, or by a majority if such removal is recommended by the Board of
Directors by the affirmative vote of at least two-thirds of the directors. The
Company's Bylaws may be adopted, amended or repealed (i) by the holders of at
least a majority of the outstanding shares of stock of the Company or (ii) by at
least a two-thirds vote of the full Board of Directors. The calling of a special
meeting of the stockholders requires the written request of holders of more than
two-thirds of all the outstanding shares of the stock of the Company, unless
called by the Board of Directors or the Chairman of the Board of Directors.

The Company's Articles of Incorporation require the affirmative vote of the
holders of at least two-thirds of either the outstanding voting stock (excluding
voting stock held by the "related person") or the directors in order to approve
any "business combination" with a "related person." A "business combination"
includes (i) any merger of the Company with a "related person," (ii) any
transfer of a substantial part of the assets of the Company to a "related
person," (iii) any transfer of a substantial part of the assets of a "related
person" to the Company, (iv) the issuance of any securities of the Company to a
"related person" and (v) certain reclassifications and recapitalizations which
have the effect of increasing the power of a "related person." A "related
person" includes any person that is the beneficial owner of five percent or more
of the outstanding shares of the Company's voting stock.

LIMITATION ON LIABILITY

As authorized by the Kansas general corporation code, the Company's Articles
of Incorporation provide that to the fullest extent permitted by Kansas law, as
the same exists or may hereafter be amended, directors and former directors of
the Company will not be liable to the Company or its stockholders for monetary
damages for an act or omission occurring in their capacity as a director. Kansas
law does not currently authorize the elimination or limitation of the liability
of a director to the extent the director is found liable (i) for any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions not in good faith that constitute a breach of duty of the director
of the Company or that involve intentional misconduct or a knowing violation of
law, (iii) for transactions from which the director received an improper
benefit, whether or not the benefit resulted from action taken within the scope
of the director's office, or (iv) for acts or omissions for which the liability
of a director is expressly provided by law.

TRANSFER AGENT AND REGISTRAR

Upon completion of this offering, the transfer agent and registrar for the
Common Stock will be American Stock Transfer & Trust Company located in New
York, New York.

43
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 4,600,000 shares of
Common Stock outstanding (4,870,000 shares if the Underwriters' over-allotment
option is exercised in full). Of these shares, the shares sold in this offering
will be freely tradeable in the public market without restriction or further
registration under the Securities Act, except for any shares purchased by an
"affiliate" (as defined in the rules and regulations under the Securities Act)
of the Company. The remaining shares (the "Restricted Shares") are deemed to be
"restricted securities" within the meaning of Rule 144 and may be publicly sold
only if registered under the Securities Act or sold in accordance with an
available exemption from registration, such as those provided by Rule 144. The
beneficial owners of 2,600,000 of the Restricted Shares have agreed with the
Underwriters not to offer, sell or otherwise dispose of any shares of Common
Stock beneficially owned or controlled by them (including subsequently acquired
shares) for a period of 180 days after the date of this Prospectus without the
prior written consent of Rauscher Pierce Refsnes, Inc., on behalf of the
representatives of the Underwriters. See "Underwriting."

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) is entitled to sell Restricted Shares if at least
two years have passed since the later of the time such shares were acquired from
the Company or an affiliate of the Company. Rule 144 provides, however, that
within any three-month period such person may only sell up to the greater of (i)
1% of the then outstanding shares of Common Stock (46,000 shares upon completion
of this offering) or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks immediately preceding the date on which notice of
the sale is filed with the Securities and Exchange Commission (the
"Commission"). Under Rule 144(k), any person who has not been an affiliate of
the Company for a period of 90 days preceding a sale of Restricted Shares is
entitled to sell such shares without regard to such volume limitations if at
least three years have passed since the later of the time such shares were
acquired from the Company or an affiliate of the Company. Shares held by persons
who are deemed to be affiliates of the Company are subject to such volume
limitations regardless of how long they have been owned or how they were
acquired. The Company is unable to estimate the number of Restricted Shares that
may be sold from time to time under Rule 144, since such number will depend on
the market price and trading volume for the Common Stock, the personal
circumstances of the sellers and other factors.

An aggregate of 400,000 shares of Common Stock have been reserved for
issuance to employees, officers, consultants and advisors of the Company
pursuant to the Incentive Plan. As of the date of this Prospectus, options to
purchase 271,000 shares of Common Stock have been granted under the Incentive
Plan. The Company anticipates filing registration statements on Form S-8 under
the Securities Act to register all of the shares of Common Stock currently
issuable or reserved for future issuance under the Incentive Plan. Shares
purchased upon exercise of the options granted pursuant to the Incentive Plan
generally are available for resale in the public market to the extent the stock
transfer restriction agreements with the Underwriters have expired, except that
any such shares issued to affiliates are subject to the volume limitations and
certain other restrictions of Rule 144, unless appropriately registered under
the Securities Act. See "Management -- 1996 Incentive Plan."

The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities. Prior to this offering, there has been
no established public trading market for the Common Stock. The Company
anticipates that the trading market in the Common Stock, if any, will be limited
based upon the number of shares currently outstanding and anticipated to be sold
in this offering. See "Risk Factors -- Shares Eligible for Future Sale."

44
<PAGE>
UNDERWRITING

The Underwriters named below, represented by Rauscher Pierce Refsnes, Inc.
and J.C. Bradford & Co. (the "Representatives"), have severally agreed, subject
to the terms and conditions of the Underwriting Agreement to purchase from the
Company the number of shares of Common Stock set forth opposite their respective
names below. The nature of the obligations of the Underwriters is such that if
any of such shares are purchased, all must be purchased.

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ------------------------------------------------------------------------------------------- -----------
<S> <C>
Rauscher Pierce Refsnes, Inc...............................................................
J.C. Bradford & Co.........................................................................

-----------
Total.................................................................................... 2,000,000
-----------
-----------
</TABLE>

The Underwriters propose initially to offer the shares of Common Stock
offered hereby to the public at the price to public set forth on the cover page
of this Prospectus. The Underwriters may allow a concession to selected dealers
who are members of the National Association of Securities Dealers, Inc. ("NASD")
not in excess of $ per share, and the Underwriters may allow, and such
dealers may reallow, to members of the NASD a concession not in excess of
$ per share. After the public offering, the price to public, the concession
and the reallowance may be changed by the Representatives.

The Company and Selling Stockholders have granted an option to the
Underwriters, exercisable within 30 days after the date of this Prospectus, to
purchase up to an aggregate of 270,000 and 30,000 additional shares of Common
Stock, respectively, at the initial price to public, less the underwriting
discount, set forth on the cover page of this Prospectus. The Underwriters may
exercise the option only for the purpose of covering over-allotments. To the
extent that the Underwriters exercise such option, each Underwriter will be
committed, subject to certain conditions, to purchase from the Company and
Selling Stockholders on a pro rata basis that number of additional shares of
Common Stock which is proportionate to such Underwriter's initial commitment.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.

The Company, its executive officers and directors, and all of its
stockholders have agreed that for a period of 180 days after the date of this
Prospectus, they will not offer, sell or otherwise dispose of any shares of
Common Stock beneficially owned or controlled by them (including subsequently
acquired shares) without the prior written consent of Rauscher Pierce Refsnes,
Inc. on behalf of the Representatives.

Prior to this offering, there has been no market for the Common Stock and
there can be no assurance that a regular trading market will develop upon the
completion of this offering. The initial public offering price will be
determined by negotiations between the Company and the Representatives. The
primary factors considered in determining such offering price will include the
history of and

45
<PAGE>
prospects for the industry in which the Company competes, market valuation of
comparable companies, market conditions for public offerings, the history of and
prospects for the Company's business, the Company's past and present operations
and earnings and the trend of such earnings, the prospects for future earnings
of the Company, the Company's current financial position, an assessment of the
Company's management, the general condition of the securities markets, the
demand for similar securities of comparable companies and other relevant
factors.

The Representatives have advised the Company that they do not expect any
sales by the Underwriters to accounts over which they exercise discretionary
authority.

LEGAL MATTERS

The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Klenda, Mitchell, Austerman & Zuercher,
L.L.C., Wichita, Kansas. Certain legal matters in connection with the issuance
of the shares of Common Stock offered hereby will be passed upon for the
Underwriters by Jackson & Walker, L.L.P., Dallas, Texas.

EXPERTS

The combined balance sheets of the Company as of December 31, 1994 and 1995,
and the combined statements of operations, stockholders' equity (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1995, have been included herein in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

The statements of operations, stockholder's equity, and cash flows of
Nashville Bagel Co., Inc. for each of the years in the three-year period ended
June 30, 1995 and for the period from July 1, 1995 through December 14, 1995,
have been included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG Peat Marwick LLP covering the June 30, 1994 financial statements of
Nashville Bagel Co., Inc. refers to a change in the method of accounting for
income taxes.

The statements of operations, stockholders' deficit, and cash flows of
Central & Ridge Yogurt, Inc. for the year ended December 31, 1995, have been
included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (as amended and together with all exhibits thereto, the "Registration
Statement") under the Securities Act, with respect to the shares of Common Stock
offered hereby. This Prospectus constitutes a part of the Registration Statement
and does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted from this Prospectus as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document
referred to herein are not necessarily complete and, where such agreement or
other document is an exhibit to the Registration Statement, each such statement
is qualified in all respects by the provisions of such exhibit, to which
reference is hereby made for a full statement of the provisions thereof. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and to the exhibits thereto.

The Registration Statement may be inspected, without charge, and copies may
be obtained, at prescribed rates, at the public reference facilities of the
Commission maintained at Judiciary Plaza,

46
<PAGE>
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Copies of the
Registration Statement may also be inspected, without charge, at the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In
addition, copies of the Registration Statement may be obtained by mail at
prescribed rates, from the Public Reference Branch of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.

As a result of this offering, the Company will become subject to the
information and periodic reporting requirements of the Exchange Act, and, in
accordance therewith, will file periodic reports, proxy statements and other
information with the Commission. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the public
reference facilities and regional offices referred to above. The Company intends
to furnish its stockholders with annual reports containing financial statements
certified by its independent auditors and with quarterly reports for each of the
first three quarters of each fiscal year containing unaudited financial
information.

47
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
New York Bagel Enterprises, Inc.:
Independent Auditors' Report............................................................................. F-2
Combined Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (unaudited)...................... F-3
Combined Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995 and the Six Months
Ended June 30, 1995 (unaudited) and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)................ F-4
Combined Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1993, 1994 and
1995 and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)........................................... F-5
Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and the Six Months
Ended June 30, 1995 (unaudited) and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)................ F-6
Notes to Combined Financial Statements................................................................... F-7
New York Bagel Enterprises, Inc. (Unaudited):
Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1995................ F-18
Notes to Pro Forma Condensed Combined Statement of Operations............................................ F-19
Nashville Bagel Co., Inc.:
Independent Auditors' Report............................................................................. F-20
Statements of Operations for the Years Ended June 30, 1993, 1994 and 1995 and for the Period from July 1,
1995 through December 14, 1995.......................................................................... F-21
Statements of Stockholder's Equity for the Years Ended June 30, 1993, 1994 and 1995 and for the Period
from July 1, 1995 through December 14, 1995............................................................. F-22
Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and 1995 and for the Period from July 1,
1995 through December 14, 1995.......................................................................... F-23
Notes to Financial Statements............................................................................ F-24
Central & Ridge Yogurt, Inc.:
Independent Auditors' Report............................................................................. F-26
Statement of Operations for the Year Ended December 31, 1995............................................. F-27
Statement of Stockholders' Deficit for the Year Ended December 31, 1995.................................. F-28
Statement of Cash Flows for the Year Ended December 31, 1995............................................. F-29
Notes to Financial Statements............................................................................ F-30
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Board of Directors
New York Bagel Enterprises, Inc.:

We have audited the accompanying combined balance sheets of New York Bagel
Enterprises, Inc. as of December 31, 1994 and 1995, and the related combined
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of New York
Bagel Enterprises, Inc. as of December 31, 1994 and 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Wichita, Kansas
February 21, 1996, except
note 14 which is as of
June 4, 1996

F-2
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
---------- ------------ JUNE 30, PRO FORMA
1996 JUNE 30,
------------ 1996 (NOTE
15)
(UNAUDITED) ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS (NOTE 7)
Current assets:
Cash................................................................... $ 46,200 $ 133,425 $ 207,454 $ 207,454
Accounts receivable (note 3)........................................... 114,492 137,853 191,593 191,593
Inventory.............................................................. 81,913 143,964 139,148 139,148
Deferred costs, net of accumulated amortization of $43,340 at June 30,
1996 (note 4)......................................................... 6,428 77,100 200,041 200,041
Other current assets (note 9).......................................... 8,598 24,018 77,379 77,379
---------- ------------ ------------ ------------
Total current assets................................................. 257,631 516,360 815,615 815,615
Property, plant and equipment, net (note 5).............................. 554,340 1,256,154 2,318,973 2,318,973
Other assets, net of accumulated amortization of $4,063, $12,433 and
$17,367 at December 31, 1994 and 1995 and June 30, 1996, respectively... 60,027 55,658 56,726 56,726
Deferred offering costs.................................................. -- 8,474 363,966 363,966
Goodwill, net of accumulated amortization of $999 and $12,475 at December
31, 1995 and June 30, 1996 (note 12).................................... -- 458,052 446,574 446,574
---------- ------------ ------------ ------------
$ 871,998 $ 2,294,698 $ 4,001,854 $ 4,001,854
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt (note 7)........................ $ 58,700 $ 519,936 $ 649,017 $ 649,017
Accounts payable....................................................... 58,640 163,172 468,897 468,897
Accrued liabilities.................................................... 99,062 83,761 485,184 485,184
Current portion of deferred franchise fees............................. 119,500 69,000 36,000 36,000
Deferred income taxes.................................................. -- -- -- 68,000
Distributions payable (note 10)........................................ 42,000 48,693 48,693 232,693
---------- ------------ ------------ ------------
Total current liabilities............................................ 377,902 884,562 1,687,791 1,939,791
Due to stockholders (note 8)............................................. 67,341 -- -- --
Long-term debt, less current portion (note 7)............................ 232,942 2,845,064 3,280,730 3,280,730
Deferred franchise fees.................................................. -- 98,000 41,500 41,500
Deferred credits......................................................... 30,059 45,537 57,809 57,809
Deferred income taxes (note 9)........................................... 4,786 -- -- 23,000
---------- ------------ ------------ ------------
Total liabilities.................................................... 713,030 3,873,163 5,067,830 5,342,830
---------- ------------ ------------ ------------
Stockholders' equity (deficit) (notes 10 and 14):
Class A common stock, $.01 par value. Authorized 25,000,000 shares;
issued and outstanding 1,416,988 shares............................... 14,170 14,170 14,170 14,170
Class B common stock, $.01 par value. Authorized 5,000,000 shares;
issued and outstanding 1,368,704, 1,368,704 and 1,383,012 shares at
December 31, 1994 and 1995 and June 30, 1996, respectively............ 13,687 13,687 13,830 13,830
Additional paid-in capital (deficit)................................... 151,293 157,793 157,650 (1,368,976)
Accumulated deficit.................................................... (20,182) (1,764,115) (1,251,626) --
---------- ------------ ------------ ------------
Total stockholders' equity (deficit)................................. 158,968 (1,578,465) (1,065,976) (1,340,976)
Commitments and contingencies (notes 6 and 13)
---------- ------------ ------------ ------------
$ 871,998 $ 2,294,698 $ 4,001,854 $ 4,001,854
---------- ------------ ------------ ------------
---------- ------------ ------------ ------------
</TABLE>

See accompanying notes to combined financial statements.

F-3
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE SIX MONTHS ENDED JUNE 30, 1995 AND
THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
SIX MONTHS TWENTY-SIX
YEARS ENDED DECEMBER 31, ENDED WEEKS ENDED
------------------------------------------- JUNE 30, JUNE 30,
1993 1994 1995 1995 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Sales from Company-owned
restaurants........................ $ 3,538,612 $ 5,653,177 $ 6,875,146 $ 3,345,422 $ 4,849,860
Franchise revenues (note 3)......... 22,677 168,704 484,300 193,413 339,733
------------- ------------- ------------- ------------- -------------
Total revenues.................... 3,561,289 5,821,881 7,359,446 3,538,835 5,189,593
------------- ------------- ------------- ------------- -------------
Costs and expenses:
Cost of sales....................... 1,527,246 2,280,012 2,612,772 1,272,689 1,733,312
Restaurant operating expenses (note
6)................................. 1,386,676 2,326,178 3,083,902 1,432,657 2,201,632
General and administrative
expenses........................... 468,691 451,900 838,190 374,972 401,883
Depreciation and amortization....... 80,145 116,960 158,996 64,579 177,213
------------- ------------- ------------- ------------- -------------
Total costs and expenses.......... 3,462,758 5,175,050 6,693,860 3,144,897 4,514,040
------------- ------------- ------------- ------------- -------------
Operating income.................. 98,531 646,831 665,586 393,938 675,553
Interest expense...................... 13,745 52,383 39,800 19,621 163,064
------------- ------------- ------------- ------------- -------------
Earnings before income taxes...... 84,786 594,448 625,786 374,317 512,489
Income tax expense (benefit) (note
9)................................... 9,280 (2,498) 6,689 -- --
------------- ------------- ------------- ------------- -------------
Net earnings...................... $ 75,506 $ 596,946 $ 619,097 $ 374,317 $ 512,489
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Pro forma to reflect income taxes
(note 2(i)):
Income tax expense.................. $ 245,628 $ 201,112
Net earnings........................ $ 380,158 $ 311,377
Net earnings per share.............. $ .13 $ .10
</TABLE>

See accompanying notes to combined financial statements.

F-4
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
CLASS A CLASS B CAPITAL DEFICIT TOTAL
--------- --------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992................... $ 14,170 $ 13,687 $ 101,043 $ (78,374) $ 50,526
Net earnings................................. -- -- -- 75,506 75,506
--------- --------- ----------- -------------- --------------
Balance, December 31, 1993................... 14,170 13,687 101,043 (2,868) 126,032
Contributed capital (note 10)................ -- -- 50,250 -- 50,250
Net earnings................................. -- -- -- 596,946 596,946
Distributions to stockholders (note 10)...... -- -- -- (614,260) (614,260)
--------- --------- ----------- -------------- --------------
Balance, December 31, 1994................... 14,170 13,687 151,293 (20,182) 158,968
Net earnings................................. -- -- -- 619,097 619,097
Stock compensation........................... -- -- 6,500 -- 6,500
Distributions to stockholders (note 10)...... -- -- -- (2,363,030) (2,363,030)
--------- --------- ----------- -------------- --------------
Balance, December 31, 1995................... 14,170 13,687 157,793 (1,764,115) (1,578,465)
Issuance of 14,308 shares of common stock
(unaudited)................................. -- 143 (143) -- --
Net earnings (unaudited)..................... -- -- -- 512,489 512,489
--------- --------- ----------- -------------- --------------
Balance, June 30, 1996 (unaudited)........... $ 14,170 $ 13,830 $ 157,650 $ (1,251,626) $ (1,065,976)
--------- --------- ----------- -------------- --------------
--------- --------- ----------- -------------- --------------
</TABLE>

See accompanying notes to combined financial statements.

F-5
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE SIX MONTHS ENDED JUNE 30, 1995 AND
THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

<TABLE>
<CAPTION>
TWENTY-SIX
YEARS ENDED DECEMBER 31, SIX MONTHS WEEKS ENDED
--------------------------------------- ENDED JUNE JUNE 30,
1993 1994 1995 30, 1995 1996
----------- ----------- ------------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................................... $ 75,506 $ 596,946 $ 619,097 $ 374,317 $ 512,489
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization...................... 80,145 116,960 158,996 64,579 177,213
Noncash stock compensation expense................. -- -- 6,500 -- --
Increase (decrease) in cash resulting from changes
in listed items, net of effects from acquisitions:
Deferred income taxes............................ 5,614 (2,498) 1,302 -- --
Inventory........................................ (16,413) (28,451) (178,209) (14,389) 4,816
Income taxes receivable.......................... (1,300) -- 1,300 -- --
Other current assets............................. 1,296 (4,348) (1,588) 5,628 (53,361)
Accounts receivable.............................. (8,854) (105,638) (23,361) (13,877) (53,740)
Deferred costs................................... -- (6,428) (70,672) 4,019 (166,281)
Other assets..................................... (3,535) (52,318) (2,403) (3,258) (6,443)
Accounts payable................................. 10,330 30,882 140,253 42,881 305,725
Accrued liabilities and deferred credits......... 47,416 34,138 78,509 49,744 413,695
Income taxes payable............................. 1,364 (2,295) -- -- --
Deferred franchise fees.......................... -- 119,500 47,500 10,500 (89,500)
----------- ----------- ------------- ----------- -------------
Net cash provided by operating activities...... 191,569 696,450 777,224 520,144 1,044,613
----------- ----------- ------------- ----------- -------------
Cash flows from investing activities:
Additions to property, plant and equipment........... (583,708) (285,080) (474,674) (147,373) (1,179,839)
Acquisitions, net of cash acquired................... -- -- (656,174) -- --
----------- ----------- ------------- ----------- -------------
Net cash used in investing activities.......... (583,708) (285,080) (1,130,848) (147,373) (1,179,839)
----------- ----------- ------------- ----------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............. 379,325 252,865 3,049,210 24,080 800,000
Principal payments on long-term debt................. (48,248) (128,309) (90,852) (40,384) (235,253)
Decrease in due to stockholders...................... (1,411) (40,274) (26,330) (25,318) --
Decrease in distributions payable.................... -- -- (8,807) (5,307) --
Proceeds from contributed capital.................... -- 50,250 -- -- --
Debt issuance costs.................................. -- -- (13,916) -- --
Deferred offering costs.............................. -- -- (8,474) -- (355,492)
Distributions to stockholders........................ -- (394,080) (2,459,982) (269,438) --
(Decrease) increase in excess of checks written over
funds on deposit.................................... 62,473 (105,622) -- -- --
----------- ----------- ------------- ----------- -------------
Net cash provided by (used in) financing
activities.................................... 392,139 (365,170) 440,849 (316,367) 209,255
----------- ----------- ------------- ----------- -------------
Net increase in cash........................... -- 46,200 87,225 56,404 74,029
Cash at beginning of period............................ -- -- 46,200 46,200 133,425
----------- ----------- ------------- ----------- -------------
Cash at end of period.................................. $ -- $ 46,200 $ 133,425 $ 102,604 $ 207,454
----------- ----------- ------------- ----------- -------------
----------- ----------- ------------- ----------- -------------
</TABLE>

See accompanying notes to combined financial statements.

F-6
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1993, 1994 AND 1995

(1) REORGANIZATION AND OPERATIONS

REORGANIZATION

The Company was formed as a result of a merger (the Merger) between New York
Bagel Enterprises, Inc., which became the surviving corporation, and New York
Bagel Shop, Inc.; New York Bagel Shop & Delicatessen, Inc.; Bagels of Norman,
Inc.; Bagel Boss, Inc.; and VPR Incorporated (the five restaurant entities). The
Merger was effective on December 31, 1995 whereby each of the five restaurant
entities were merged into New York Bagel Enterprises, Inc. (collectively the
five restaurant entities and New York Bagel Enterprises, Inc. are referred to as
the Prior Entities). The term Company as used herein refers to New York Bagel
Enterprises, Inc. including the five restaurant entities unless the context
otherwise requires.

To effect the Merger, New York Bagel Enterprises, Inc. issued 1,368,704
shares of its Class B common stock in exchange for all the outstanding stock of
each of the five restaurant entities.

Since the primary stockholders of each of the five restaurant entities prior
to the Merger are also the primary stockholders of the Company subsequent to the
Merger, the Merger essentially represents a transfer to New York Bagel
Enterprises, Inc. of nonmonetary assets in exchange for stock prior to a
proposed public offering of the Company's common stock (the Offering). The
Merger has been accounted for at historical cost.

The accompanying financial statements are presented on a combined basis for
all periods presented due to the common management of the Prior Entities
throughout the period of the financial statements.

The Company converted shares of Class A common stock outstanding in
connection with the Merger (effectively a 3373.78:1 stock split). The
outstanding shares of common stock, as reflected in the accompanying financial
statements, include the effect of such stock conversion and the shares issued to
effect the Merger for all periods presented.

OPERATIONS

The Company operates Company-owned restaurants and sells franchise rights to
operate restaurants. In both instances, the restaurants operate under the New
York Bagel and Delicatessen concept which is a quick-service bakery featuring
freshly made bagels and deli-style sandwiches. As of December 31, 1995, the
Company had 15 Company-owned restaurants primarily located in Oklahoma and
Kansas and 25 franchised restaurants located throughout the United States.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) FRANCHISE REVENUES

Franchise agreements are executed for each franchised restaurant and provide
the terms of the franchise arrangement between the Company and the franchisee.
The franchise agreement requires the franchisee to pay an initial,
non-refundable franchise fee plus continuing royalties based upon a percentage
of restaurant sales. Additionally, the Company executes development agreements
with franchisees which stipulates the area, the number of restaurants, and the
timeframe for development in exchange for an initial, non-refundable development
fee based on a standard price per type of restaurant.

F-7
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
uncollectible amounts. Initial franchise fees received applicable to restaurants
for which substantially all initial services required by the franchise agreement
have not been performed are recorded as deferred franchise fees in the
accompanying balance sheets. Development fees are received upon signing the
agreement and are initially recorded as deferred franchise fees. Such fees are
applied to reduce the initial franchise fees paid for each store opened and are
accounted for as a component of the initial franchise fees.

Deferred initial franchise and development fees that are expected to be
recognized within 12 months of the balance sheet date are classified as current
portion of deferred franchise fees in the accompanying balance sheets.

(b) INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

Direct, incremental costs incurred to secure franchise agreements are
charged to expense in the same period the related initial franchise fees are
recognized as revenue. Costs applicable to initial franchise fees not yet
recognized as revenue are recorded as deferred franchise costs.

(d) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized on a straight-line basis over the lesser of
the remaining lease term, including renewal periods when the Company intends to
exercise renewal options, or the estimated useful life of the asset.

(e) GOODWILL

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over 20 years. The
Company periodically assesses the recoverability of this intangible asset by
determining whether the amortization of the goodwill balance over its remaining
life can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is measured based
on projected future operating cash flows discounted at a rate commensurate with
the risks involved. The assessment of the recoverability of goodwill will be
impacted if estimated future operating cash flows are not achieved.

(f) INCOME TAXES

Effective January 1, 1994, New York Bagel Enterprises, Inc. and certain of
the restaurant entities elected and received approval to become S corporations.
During the periods the entities operated as S corporations, income tax expense
or benefit was not recorded in the accompanying financial statements as the
entities' results of operations were reported to the entities' stockholders for
inclusion in their individual income tax returns.

Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES
(Statement 109). Under the asset and liability method of Statement 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or

F-8
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
settled. Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment date. There was no cumulative effect of adoption of Statement 109 as
of January 1, 1993.

(g) STATEMENTS OF CASH FLOWS

Noncash investing and financing activities during 1994 and 1995 included:

<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Noncash distributions to stockholders:
Distributions payable (see note 10)............................. $ 42,000 $ 15,500
------------ ------------
Net asset (liability) distributions (see note 10):
Assets distributed............................................ 507,695 137,134
Liabilities distributed....................................... (329,515) (249,586)
------------ ------------
Net assets (liabilities) distributed........................ 178,180 (112,452)
------------ ------------
Total noncash distributions................................. $ 220,180 $ (96,952)
------------ ------------
------------ ------------
Property, plant and equipment acquired in exchange for increase in
due to stockholders (see note 8)................................. $ 44,250 $ --
------------ ------------
------------ ------------
Long-term debt issued to seller in connection with acquisition
(see note 7)..................................................... $ -- $ 115,000
------------ ------------
------------ ------------
</TABLE>

Cash paid during the years for interest and taxes is as follows:

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest................................................... $ 13,745 $ 52,383 $ 36,676
Taxes...................................................... 1,300 3,660 --
</TABLE>

(h) PRE-OPENING COSTS

Direct, incremental restaurant pre-opening costs, comprised primarily of the
cost of hiring and training restaurant employees and rent, are amortized over
the initial 12 months of a restaurant's operations.

(i) PRO FORMA INCOME TAX EXPENSE AND PRO FORMA NET EARNINGS PER SHARE

PRO FORMA INCOME TAX EXPENSE

Subsequent to the proposed Offering, the Company will no longer operate as
an S corporation. Pro forma income tax expense, as set forth in the accompanying
statements of operations, reflects what the income tax expense of the Company
would have been for the year ended December 31, 1995, and the twenty-six weeks
ended June 30, 1996 if none of the entities included in the combined financial
statements had operated as S corporations during such periods.

PRO FORMA NET EARNINGS PER SHARE

Pro forma net earnings per share information, as set forth in the
accompanying statements of operations, is computed based on pro forma net
earnings of $380,158 and $311,377 which is based on reported earnings before
income taxes less pro forma income tax expense of $245,628 and $201,112 for the
year ended December 31, 1995 and the twenty-six weeks ended June 30, 1996,
respectively.

F-9
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Pro forma weighted average common shares outstanding have been determined as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------ TWENTY-SIX
WEEKS ENDED
JUNE 30, 1996
-------------
(UNAUDITED)
<S> <C> <C>
Weighted average shares outstanding............................. 2,785,692 2,800,000
Shares issued during 12-month period prior to initial filing of
the registration statement at price per share below the initial
public offering price.......................................... 14,308 --
Pro forma number of shares whose proceeds would be sufficient
(based upon the estimated net initial public offering price) to
replace the excess of distributions to stockholders over net
earnings for the year ended December 31, 1995.................. 178,134 178,134
------------ -------------
Pro forma weighted average common shares outstanding............ 2,978,134 2,978,134
------------ -------------
------------ -------------
</TABLE>

The 19,320 shares contingently issuable under the convertible subordinated
debenture (see note 7) have not been considered in the computation of pro forma
net earnings per share due to immateriality.

(j) USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates.

(k) INTERIM FINANCIAL DATA (UNAUDITED)

The accompanying balance sheet as of June 30, 1996 and the accompanying
statements of operations, stockholders' equity (deficit) and cash flows for the
six months ended June 30, 1995 and the twenty-six weeks ended June 30, 1996 have
been prepared by the Company without an audit. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation for such periods have been made. Results for
interim periods should not be considered as indicative of results for a full
year.

Footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted herein with respect to the interim financial data. The interim
information herein should be read in conjunction with the annual financial
information presented herein.

(l) NEW ACCOUNTING STANDARD

The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF as of January 1, 1996. There was no effect
at the date of adoption.

(m) FISCAL PERIODS

Prior to 1996, the Company's financial reporting was done on a calendar
basis. Effective January 1, 1996, the Company changed to a 52/53-week fiscal
year comprised of four thirteen-week periods.

F-10
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(3) FRANCHISE REVENUES

Franchise revenues for the years ended December 31, 1993, 1994 and 1995
consist of the following:

<TABLE>
<CAPTION>
1993 1994 1995
--------- ----------- -----------
<S> <C> <C> <C>
Initial franchise and development fees............................ $ 21,000 $ 108,000 $ 250,500
Royalty revenue................................................... 1,677 60,704 233,800
--------- ----------- -----------
Total........................................................... $ 22,677 $ 168,704 $ 484,300
--------- ----------- -----------
--------- ----------- -----------
</TABLE>

The associated franchise receivables included within accounts receivable in
the accompanying balance sheets at December 31, 1994 and 1995 are as follows:

<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Initial franchise and development fee receivables............................. $ 104,000 $ 106,416
Royalty receivables........................................................... 10,492 46,437
Less allowance for doubtful accounts.......................................... -- (15,000)
----------- -----------
$ 114,492 $ 137,853
----------- -----------
----------- -----------
</TABLE>

(4) DEFERRED COSTS

Deferred costs as of December 31, 1994 and 1995 include the following:

<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Pre-opening costs................................................................. $ -- $ 60,445
Deferred franchise costs.......................................................... 6,428 16,655
--------- ---------
Total deferred costs............................................................ $ 6,428 $ 77,100
--------- ---------
--------- ---------
</TABLE>

(5) PROPERTY, PLANT AND EQUIPMENT

A summary of property, plant and equipment and accumulated depreciation as
of December 31, 1994 and 1995 is as follows:

<TABLE>
<CAPTION>
1994 1995
------------ -------------
<S> <C> <C>
Buildings.................................................................. $ 30,292 $ 30,292
Equipment.................................................................. 781,741 1,354,649
Leasehold improvements..................................................... 173,824 453,863
------------ -------------
985,857 1,838,804
Less accumulated depreciation.............................................. (431,517) (582,650)
------------ -------------
Net property, plant and equipment........................................ $ 554,340 $ 1,256,154
------------ -------------
------------ -------------
</TABLE>

(6) LEASES

The Company leases several restaurant facilities under noncancelable
operating leases. These leases generally contain renewal options for periods
ranging from 3 to 15 years and require the Company to pay executory costs such
as maintenance and insurance. Rent expense for operating leases aggregated
$126,614, $193,418 and $296,950 for the years ended December 31, 1993, 1994 and
1995, respectively.

F-11
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(6) LEASES (CONTINUED)
Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year as of December 31, 1995
are:

<TABLE>
<S> <C>
Year ending December 31:
1996................................................................. $ 305,200
1997................................................................. 255,875
1998................................................................. 222,447
1999................................................................. 201,662
2000................................................................. 100,592
Thereafter........................................................... 119,697
----------
Total minimum lease payments....................................... $1,205,473
----------
----------
</TABLE>

The Company is party to certain operating leases with companies that are
owned by certain stockholders of the Company. Rent expense paid to these related
companies pursuant to lease agreements aggregated $14,100 and $63,249 for the
years ended December 31, 1994 and 1995, respectively.

Deferred credits in the accompanying balance sheets represent accruals for
escalating rental payments on operating leases.

F-12
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(7) LONG-TERM DEBT

Long-term debt at December 31, 1994 and 1995 consists of the following:

<TABLE>
<CAPTION>
1994 1995
----------- -------------
<S> <C> <C>
Prime rate plus 1.0% note payable to bank (9.5% at December 31, 1995) due in
monthly installments of $57,800 including interest with the remaining
balance due in December 2000. Secured by substantially all tangible and
intangible assets of the Company and guaranteed by certain Company
stockholders............................................................... $ -- $ 2,750,000
Prime rate plus 0.5% note payable to bank (9.0% at December 31, 1995) due in
monthly installments of $8,110 including interest beginning in April 1996
with the remaining balance due in March 2003. Secured by substantially all
tangible and intangible assets of the Company and guaranteed by certain
Company stockholders....................................................... -- 500,000
4.0% contingently convertible subordinated debenture payable in annual
installments of $28,750 plus interest beginning in December 1996. The
debenture may be converted at the option of the debenture holder into
shares of common stock equal to a maximum 0.69% of the Company's
outstanding common stock but the conversion privilege is only operative in
the event the Company has completed an initial public offering of its
common stock which meets certain specified criteria. The debenture is
subordinate to all other liabilities of the Company (note 12).............. -- 115,000
Various notes payable with a bank due in monthly installments through
October 2001 with interest rates ranging from 8.0% to 10.875%; secured by
equipment. Notes were refinanced as part of the $2,750,000 note payable to
bank discussed above....................................................... 264,527 --
8.0% note payable to a bank due in monthly installments through 2001;
secured by equipment. The note was fully paid-off in 1995.................. 27,115 --
----------- -------------
Total long-term debt...................................................... 291,642 3,365,000
Less current installments of long-term debt................................. (58,700) (519,936)
----------- -------------
Long-term debt, less current installments................................... $ 232,942 $ 2,845,064
----------- -------------
----------- -------------
</TABLE>

The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1995 are as follows: 1996 - $519,936; 1997 -
$582,364; 1998 - $637,154; 1999 - $697,365; 2000 - $731,357; and thereafter
$196,824.

(8) DUE TO STOCKHOLDERS

Amounts due to stockholders represent funds advanced to the Company from
stockholders of the five restaurant entities which were used primarily for
equipment additions. Such amounts were non-interest-bearing and were either
repaid in 1995 or included in the transfer to stockholders described in note 10.

F-13
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES

Income tax expense (benefit) for the years ended December 31, 1993, 1994 and
1995 consists of the following:

<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Current................................................................ $ 3,666 $ -- $ 9,805
Deferred............................................................... 5,614 (2,498) (3,116)
--------- --------- ---------
Total................................................................ $ 9,280 $ (2,498) $ 6,689
--------- --------- ---------
--------- --------- ---------
</TABLE>

As described in note 2, certain entities included in the combined financial
statements elected S corporation status as of January 1, 1994, and as a result
no longer pay corporate income taxes. Additionally, as a result of the Merger
discussed in note 1, the Company is an S corporation effective December 31, 1995
and, accordingly, no deferred tax assets or liabilities are recorded in the
accompanying balance sheet as of December 31, 1995. Consequently, income tax
expense (benefit) for the years ended December 31, 1994 and 1995 include the
reversal of existing deferred tax assets and liabilities for those entities
which first became S corporations in each year.

Actual income tax expense (benefit) differs from the "expected" tax expense
(benefit) computed by applying the United States Federal corporate tax rate of
34% to earnings before income taxes for the years ended December 31, 1993, 1994
and 1995 as follows:

<TABLE>
<CAPTION>
1993 1994 1995
---------- ------------ ------------
<S> <C> <C> <C>
Computed expected tax expense.................................. $ 28,827 $ 202,112 $ 212,767
S corporation earnings allocated to stockholders............... -- (193,589) (195,515)
Surtax exemption............................................... (16,199) (6,488) (7,613)
Change in valuation allowance.................................. (6,596) (5,303) (9,736)
Other.......................................................... 3,248 770 6,786
---------- ------------ ------------
$ 9,280 $ (2,498) $ 6,689
---------- ------------ ------------
---------- ------------ ------------
</TABLE>

Income taxes receivable of $1,300 and $16,747 at December 31, 1994 and 1995,
respectively, are included in the accompanying balance sheets as a component of
other current assets. A net deferred tax asset of $1,670 was included in other
current assets at December 31, 1994.

The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at December 31, 1994 are presented below:

<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforward................................. $ 8,867
Accrued liabilities, due to accrual for financial reporting
purposes....................................................... 2,539
---------
Total gross deferred tax assets............................... 11,406
Less valuation allowance...................................... 9,736
---------
Net deferred tax asset........................................ 1,670
Deferred tax liabilities:
Property, plant and equipment, due to accelerated depreciation
for tax reporting purposes..................................... 4,786
---------
Net deferred tax liability.................................... $ (3,116)
---------
---------
</TABLE>

F-14
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES (CONTINUED)
Differences between the tax bases and the amounts reported for financial
statement purposes for the Company's assets and liabilities at December 31, 1995
are as follows:

<TABLE>
<CAPTION>
AMOUNTS
REPORTED FOR
FINANCIAL
TAX BASES STATEMENTS
------------- -------------
<S> <C> <C>
Assets.......................................................... $ 2,069,284 $ 2,294,698
Liabilities..................................................... $ 3,765,972 $ 3,873,163
</TABLE>

(10)STOCKHOLDERS' EQUITY

CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS TO STOCKHOLDERS

In July 1994, pursuant to a contract for sale of stock (the contract) of New
York Bagel Enterprises, Inc., an Oklahoma corporation (NYBE-OK), the then
existing stockholders (sellers) of NYBE-OK sold a 50% ownership interest in
NYBE-OK to certain individuals (buyers) in exchange for a cash payment from the
buyers directly to the sellers and a $50,000 contribution by the buyers to
NYBE-OK of which $49,250 has been recorded as contributed capital and $750 has
been applied as payment of amounts owed to NYBE-OK by the sellers. The remaining
$1,000 of capital contribution in 1994 was a cash contribution to one of the
five restaurant entities. Pursuant to the contract, NYBE-OK is obligated to pay
to the sellers (as distributions) collections of franchise fees NYBE-OK receives
subsequent to closing of the contract for certain specified locations. To the
extent such fees have been recognized as income but have not yet been
distributed to the sellers, such amounts are recorded as distributions payable
in the accompanying balance sheets.

Distributions to stockholders for the years ended December 31, 1994 and 1995
are comprised of the following:

<TABLE>
<CAPTION>
1994 1995
----------- -------------
<S> <C> <C>
Distributions of NYBE-OK.......................................... $ 132,000 $ 963,923
Distributions of the five restaurant entities..................... 482,260 1,399,107
----------- -------------
Total distributions............................................... $ 614,260 $ 2,363,030
----------- -------------
----------- -------------
</TABLE>

As disclosed in note 2(g), distributions of the five restaurant entities
include two transfers to certain stockholders in 1994 of real estate net of
related indebtedness and the transfer in 1995, prior to the Merger, of certain
assets and liabilities (primarily restaurant related current assets and
liabilities) to the stockholders of the five restaurant entities.

CLASS B COMMON STOCK

The Class B common stock has no voting power. Class A common stock has full
voting power. The Class B common stock will be converted into Class A common
stock on a one-for-one basis upon completion of the Offering of the Class A
common stock.

(11)FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION

The carrying values of the Company's long-term debt approximates their fair
values based on current interest rates of similar instruments. The carrying
values of the Company's other financial instruments at December 31, 1995,
including cash, accounts receivable, other current assets, accounts payable, and
accrued expenses approximate their fair values because of their short maturity.

F-15
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(12)ACQUISITIONS

Effective December 14, 1995, the Company purchased all the outstanding
common stock of Nashville Bagel Co., Inc. for $565,000. Acquisition expenses
amounted to $23,338. The acquisition has been accounted for by the purchase
method of accounting and, accordingly, the operations of Nashville Bagel Co.,
Inc. have been included in the accompanying statements of operations subsequent
to December 14, 1995. The purchase price has been allocated to the assets and
liabilities acquired based on their estimated fair values at date of
acquisition. Goodwill arising from the acquisition amounted to $434,451.

Effective December 31, 1995, the Company purchased certain assets of Central
& Ridge Yogurt, Inc. by assuming liabilities amounting to $225,000. The
acquisition has been accounted for by the purchase method of accounting. The
purchase price has been allocated to the net assets acquired based on their
estimated fair values at date of acquisition. Goodwill arising from the
acquisition amounted to $24,600. A Company officer was also an officer and
stockholder of Central & Ridge Yogurt, Inc.

The following table summarizes the pro forma results of operations for the
years ended December 31, 1994 and 1995 as if the acquisitions had been
consummated at the beginning of the respective periods. In presenting the pro
forma information, depreciation, amortization and interest expense have been
adjusted to reflect the purchase accounting recorded in the acquisitions and
income taxes have been recognized as if none of the entities included in the pro
forma results had operated as a S corporation. The pro forma results do not
necessarily reflect what would have occurred if the acquisitions had been made
at the beginning of the respective periods or the results that may occur in the
future.

<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Revenues........................................................ $ 7,339,463 $ 8,761,108
Net earnings.................................................... 311,051 223,898
Net earnings per share.......................................... .08
</TABLE>

(13)COMMITMENTS AND CONTINGENCIES

Pursuant to the terms of one operating lease, the Company has guaranteed the
performance under a lease agreement of an unrelated lessee. As of December 31,
1995, future lease payments guaranteed aggregated $54,000; however, the lessee
is current on lease payments and the Company does not currently expect to incur
any loss applicable to this guaranty.

As of December 31, 1995, the Company has issued a guaranty totaling $35,000
on a borrowing by a franchisee. The Company monitors the financial performance
of such franchisee and the Company does not believe an accrual is necessary for
the Company's obligation under this guaranty.

(14)SUBSEQUENT EVENTS

STOCK SPLIT

On June 4, 1996, the Company effected a 1.4 for 1 stock split. The stock
split has been reflected retroactively for all periods presented in the
accompanying financial statements and, accordingly, all applicable dollar, share
and per share amounts have been restated to reflect the stock split.

STOCK AWARDS

On January 16, 1996, the Company adopted the 1996 Incentive Plan (the Plan)
which authorizes the award of 400,000 shares of common stock pursuant to
incentive stock options, nonqualified stock options or restricted stock. As of
June 4, 1996, options to purchase 271,000 shares of common stock

F-16
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(14)SUBSEQUENT EVENTS (CONTINUED)
have been granted pursuant to the Plan. The exercise price per share is equal to
100% of the price per share of common stock to be issued pursuant to the
Offering for options pertaining to 193,500 shares and is equal to 110% of such
price per share for options pertaining to 77,500 shares. One-fifth of the
options will become exercisable six months after date of grant and one-fifth on
each of the first four anniversaries of the date of grant.

(15)PRO FORMA BALANCE SHEET (UNAUDITED)

The unaudited pro forma balance sheet at June 30, 1996 gives effect to the
following transactions as if such transaction occurred on that date:

(1) An accrual for the distribution of $184,000 to stockholders as if
the Company had terminated its S corporation status at June 30, 1996 and
made a distribution to the stockholders in connection with their estimated
federal and state income tax obligations.

(2) An estimated $91,000 of deferred tax liability which would be
recorded as a debit to accumulated deficit had the Company terminated its S
corporation status at June 30, 1996.

(3) Reclassification of accumulated deficit to additional paid-in
capital (deficit) as if the Company had terminated its S corporation status
at June 30, 1996.

F-17
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995

The following pro forma condensed combined statement of operations presents
the results of operations of the Company for the year ended December 31, 1995 as
if the acquisitions of Nashville Bagel Co., Inc. and Central & Ridge Yogurt,
Inc. had each occurred as of January 1, 1995. The acquisitions have been
accounted for by the purchase method of accounting. The pro forma financial
information should be read in conjunction with the related historical financial
information of the Company, Nashville Bagel Co., Inc. and Central & Ridge
Yogurt, Inc. included elsewhere herein. The unaudited pro forma condensed
combined statement of operations does not purport to represent what the
Company's results of operations would actually have been had the transactions in
fact occurred on the aforementioned date, or to project the Company's results of
operations for any future periods. The pro forma adjustments are based upon
available information and upon certain assumptions that management believes are
reasonable. These adjustments are directly attributable to the transactions and
are expected to have a continuing impact on the results of operations of the
Company.

<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------------
NEW YORK CENTRAL &
BAGEL NASHVILLE RIDGE
ENTERPRISES, BAGEL CO., YOGURT,
INC. INC. INC. PRO FORMA
------------- ------------- ----------- PRO FORMA -------------
ADJUSTMENTS
------------
(NOTE A)
<S> <C> <C> <C> <C> <C>
Total revenues........................ $ 7,359,446 $ 1,074,719 $ 326,943 $ -- $ 8,761,108
------------- ------------- ----------- ------------ -------------
Costs and expenses:
Cost of sales....................... 2,612,772 363,972 162,836 -- 3,139,580
Restaurant operating expenses....... 3,083,902 677,200 186,696 -- 3,947,798
General and administrative
expenses........................... 838,190 79,378 27,861 -- 945,429
Depreciation and amortization....... 158,996 16,421 31,108(1) 4,852 234,329
(2) 22,952
------------- ------------- ----------- ------------ -------------
Total costs and expenses.......... 6,693,860 1,136,971 408,501 27,804 8,267,136
------------- ------------- ----------- ------------ -------------
Operating income (loss)........... 665,586 (62,252) (81,558) (27,804) 493,972
Interest expense (note B)............. 39,800 -- 16,893(3) 52,042 108,735
Gain on sale of business.............. -- -- (92,342 (4) 92,342 --
------------- ------------- ----------- ------------ -------------
Earnings (loss) before income
taxes............................ 625,786 (62,252) (6,109) (172,188) 385,237
Income tax expense (benefit).......... 6,689 (13,176) -- (5) 167,826 161,339
------------- ------------- ----------- ------------ -------------
Net earnings (loss)............... $ 619,097 $ (49,076) $ (6,109) $ (340,014) $ 223,898
------------- ------------- ----------- ------------ -------------
------------- ------------- ----------- ------------ -------------
Pro forma net earnings per share...... $ .13 $ .08
------------- -------------
------------- -------------
Pro forma weighted average common
shares outstanding................... 2,978,134 2,978,134
------------- -------------
------------- -------------
</TABLE>

F-18
<PAGE>
NEW YORK BAGEL ENTERPRISES, INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
DECEMBER 31, 1995

NOTE A:

The acquisition of Nashville Bagel Co., Inc. was effective as of December
14, 1995 and the acquisition of Central & Ridge Yogurt, Inc. was effective as of
December 31, 1995. The results of operations of such acquired businesses have
been included in the Company's historical statement of operations subsequent to
the respective dates of acquisition.

Prior to the acquisition, Nashville Bagel Co., Inc. had a fiscal year ended
June 30. For purposes of the accompanying unaudited pro forma condensed combined
statement of operations, the Nashville Bagel Co., Inc. historical statement of
operations has been updated to a December 31 year end basis by deducting
operations for the six-month period ended December 31, 1994 from the statement
of operations for the year ended June 30, 1995 and adding the operations for the
period from July 1, 1995 through December 14, 1995.

Pro forma adjustments are as follows:

(1) To reflect depreciation expense based upon the cost assigned to
acquired assets based upon applying the purchase method of accounting.

(2) To reflect the amortization of goodwill over 20 years using the
straight-line method.

(3) To reflect interest expense applicable to borrowings incurred to
effect the acquisitions.

(4) To eliminate nonrecurring gain on sale of business.

(5) To reflect the adjustment for income taxes. Such adjustment has been
derived by applying statutory rates to pro forma earnings before income
taxes adjusted for permanent differences.

NOTE B:

A pro forma adjustment has not been included to reflect interest expense
applicable to borrowings incurred by the Company in December 1995 to finance
distributions to stockholders because the Company intends to use the proceeds of
the Offering to repay such borrowings and the number of shares whose proceeds
would be sufficient (based upon the estimated net offering price) to replace the
excess of distributions to stockholders over net earnings have been considered
as outstanding for purposes of computing pro forma net earnings per share.

F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Boards of Directors
Nashville Bagel Co., Inc. and
New York Bagel Enterprises, Inc.:

We have audited the accompanying statements of operations, stockholder's
equity and cash flows of Nashville Bagel Co., Inc. for each of the years in the
three-year period ended June 30, 1995 and for the period from July 1, 1995
through December 14, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of
Nashville Bagel Co., Inc. for each of the years in the three-year period ended
June 30, 1995 and for the period from July 1, 1995 through December 14, 1995, in
conformity with generally accepted accounting principles.

As discussed in note 2 to the financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, in 1994.

KPMG Peat Marwick LLP

Wichita, Kansas
February 12, 1996

F-20
<PAGE>
NASHVILLE BAGEL CO., INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1995
JUNE 30, THROUGH
------------------------------------------- DECEMBER 14,
1993 1994 1995 1995
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues.............................................. $ 1,137,246 $ 1,189,756 $ 1,243,796 $ 472,057
------------- ------------- ------------- ------------
Costs and expenses:
Cost of sales....................................... 382,512 390,289 403,966 167,414
Restaurant operating expenses....................... 613,563 637,770 721,689 318,305
General and administrative expenses................. 18,883 16,974 20,118 9,503
Officers' salaries.................................. 85,000 52,000 52,000 24,000
Depreciation........................................ 19,724 24,036 18,816 8,624
------------- ------------- ------------- ------------
Total costs and expenses.......................... 1,119,682 1,121,069 1,216,589 527,846
------------- ------------- ------------- ------------
Earnings (loss) before income taxes................... 17,564 68,687 27,207 (55,789)
Income tax expense (benefit).......................... 4,878 16,616 6,582 (11,808)
------------- ------------- ------------- ------------
Net earnings (loss)................................... $ 12,686 $ 52,071 $ 20,625 $ (43,981)
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>

See accompanying notes to financial statements.

F-21
<PAGE>
NASHVILLE BAGEL CO., INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 30, 1992........................................... $ 5,000 $ 30,000 $ 36,253 $ 71,253
Net earnings..................................................... -- -- 12,686 12,686
----------- ----------- ----------- -----------
Balance, June 30, 1993........................................... 5,000 30,000 48,939 83,939
Net earnings..................................................... -- -- 52,071 52,071
----------- ----------- ----------- -----------
Balance, June 30, 1994........................................... 5,000 30,000 101,010 136,010
Contribution of capital.......................................... -- 25,000 -- 25,000
Net earnings..................................................... -- -- 20,625 20,625
----------- ----------- ----------- -----------
Balance, June 30, 1995........................................... 5,000 55,000 121,635 181,635
Net loss......................................................... -- -- (43,981) (43,981)
----------- ----------- ----------- -----------
Balance, December 14, 1995....................................... $ 5,000 $ 55,000 $ 77,654 $ 137,654
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>

See accompanying notes to financial statements.

F-22
<PAGE>
NASHVILLE BAGEL CO., INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1995
JUNE 30, THROUGH
---------------------------------- DECEMBER 14,
1993 1994 1995 1995
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)........................................ $ 12,686 $ 52,071 $ 20,625 $ (43,981)
Adjustments to reconcile net earnings (net loss) to net
cash provided by (used in) operating activities:
Depreciation............................................. 19,724 24,036 18,816 8,624
Deferred income taxes.................................... (1,549) 104 1,710 (1,124)
Increase in inventory.................................... (164) (283) (292) --
(Increase) decrease in income taxes receivable........... (897) 897 (6,063) (10,684)
(Increase) decrease in other assets...................... 232 (12) 54 140
Increase (decrease) in accounts payable.................. 11,700 (2,090) (684) 450
Increase (decrease) in income taxes payable.............. (799) 10,084 (13,368) --
Increase (decrease) in accrued liabilities............... 946 3,914 2,867 (3,714)
---------- ---------- ---------- ------------
Net cash provided by (used in) operating activities.... 41,879 88,721 23,665 (50,289)
---------- ---------- ---------- ------------
Cash flows from investing activities:
Additions to property, plant and equipment................. (41,670) (9,723) (24,209) (4,771)
---------- ---------- ---------- ------------
Cash flows from financing activities:
Repayment of note payable to bank.......................... (34,496) (10,400) -- --
Repayment of debenture payable to stockholder.............. -- -- (25,000) --
---------- ---------- ---------- ------------
Net cash used in financing activities.................. (34,496) (10,400) (25,000) --
---------- ---------- ---------- ------------
Net increase (decrease) in cash........................ (34,287) 68,598 (25,544) (55,060)
Cash at beginning of period.................................. 64,720 30,433 99,031 73,487
---------- ---------- ---------- ------------
Cash at end of period........................................ $ 30,433 $ 99,031 $ 73,487 $ 18,427
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Cash paid for taxes.......................................... $ 4,040 $ 5,531 $ 25,298 $ --
---------- ---------- ---------- ------------
---------- ---------- ---------- ------------
Significant noncash financing activities:
During the year ended June 30, 1995, $25,000 of a $50,000 debenture payable to the stockholder was
contributed to additional paid-in capital.
</TABLE>

See accompanying notes to financial statements.

F-23
<PAGE>
NASHVILLE BAGEL CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

(1) OPERATIONS
Nashville Bagel Co., Inc. (the Company) operates a retail bagel restaurant
located in Nashville, Tennessee. The Company also wholesales bagels to grocery
stores and other food service entities.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

(b) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Depreciation is calculated
using the double declining balance method over the estimated useful lives of the
assets. Leasehold improvements are amortized over the remaining lease term,
including renewal periods.

Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (Statement
109). Under the asset and liability method of Statement 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date. There
was no cumulative effect of adoption of Statement 109 as of July 1, 1993.

(d) USE OF ESTIMATES

The preparation of financial statements in accordance with generally
accepted accounting principles requires management of the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from these estimates.

(3) INCOME TAXES
Income tax expense (benefit) for years ended June 30, 1993, 1994 and 1995
and the period from July 1, 1995 through December 14, 1995 consists of the
following:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1995
JUNE 30, THROUGH
------------------------------- DECEMBER 14,
1993 1994 1995 1995
--------- --------- --------- ------------
<S> <C> <C> <C> <C>
Current:
Federal..................................... $ 3,143 $ 10,586 $ 2,721 $ (11,706)
State....................................... 3,284 5,926 2,151 1,022
Deferred...................................... (1,549) 104 1,710 (1,124)
--------- --------- --------- ------------
Total..................................... $ 4,878 $ 16,616 $ 6,582 $ (11,808)
--------- --------- --------- ------------
--------- --------- --------- ------------
</TABLE>

F-24
<PAGE>
NASHVILLE BAGEL CO., INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995 (CONTINUED)

(3) INCOME TAXES (CONTINUED)
Actual income tax expense (benefit) differs from the "expected" income tax
expense (benefit) computed by applying the United States Federal corporate tax
rate of 34% to earnings (loss) before income taxes for the years ended June 30,
1993, 1994 and 1995 and for the period from July 1, 1995 through December 14,
1995 and the as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 1, 1995
JUNE 30, THROUGH
-------------------------------- DECEMBER 14,
1993 1994 1995 1995
--------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Tax at statutory rate....................... $ 5,972 $ 23,353 $ 9,250 $ (18,968)
State income taxes, net of federal
benefit.................................... 2,167 3,911 2,076 674
Effect of graduated rates................... (3,261) (10,648) (4,744) 6,486
--------- ---------- --------- ------------
$ 4,878 $ 16,616 $ 6,582 $ (11,808)
--------- ---------- --------- ------------
--------- ---------- --------- ------------
</TABLE>

The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities are due to liabilities accrued for financial reporting
purposes and property, plant and equipment which have different tax and
financial reporting bases. Net deferred tax assets amounted to $13,523; $13,419;
$11,709 and $12,833 at June 30, 1993, June 30, 1994, June 30, 1995 and December
14, 1995, respectively.

(4) LEASES
The Company leases its restaurant facility under a noncancelable operating
lease that expires in May 1996 and contains three remaining renewal options for
five years each. The lease requires the Company to pay executory costs such as
maintenance and insurance. Rent expense amounted to $77,651; $80,246; $83,456
and $43,110 for years ended June 30, 1993, 1994 and 1995 and the period from
July 1, 1995 through December 14, 1995, respectively.

(5) SALE OF BUSINESS
Effective December 14, 1995, the stockholder of the Company sold all of the
Company's outstanding common stock to New York Bagel Enterprises, Inc.

F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT

The Boards of Directors
Central & Ridge Yogurt, Inc. and
New York Bagel Enterprises, Inc.:

We have audited the accompanying statements of operations, stockholders'
deficit, and cash flows of Central & Ridge Yogurt, Inc. for the year ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of
Central & Ridge Yogurt, Inc. for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.

KPMG Peat Marwick LLP

Wichita, Kansas
March 26, 1996

F-26
<PAGE>
CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Revenues......................................................................... $ 326,943
---------
Costs and expenses:
Cost of sales.................................................................. 162,836
Restaurant operating expenses.................................................. 186,696
General and administrative expenses............................................ 27,861
Depreciation and amortization.................................................. 31,108
---------
Total costs and expenses..................................................... 408,501
---------
Operating loss............................................................... (81,558)
Other expense (income):
Interest expense............................................................... 16,893
Gain on sale of business (note 5).............................................. (92,342)
---------
Net loss..................................................................... $ (6,109)
---------
---------
</TABLE>

See accompanying notes to financial statements.

F-27
<PAGE>
CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994............................. 1,000 $ 1,000 $ 109,000 $ (143,310) $ (33,310)
Net loss............................................... -- -- -- (6,109) (6,109)
Distributions to stockholders.......................... -- -- -- (7,164) (7,164)
--------- --------- ----------- ------------ ----------
Balance, December 31, 1995............................. 1,000 $ 1,000 $ 109,000 $ (156,583) $ (46,583)
--------- --------- ----------- ------------ ----------
--------- --------- ----------- ------------ ----------
</TABLE>

See accompanying notes to financial statements.

F-28
<PAGE>
CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1995

<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss...................................................................... $ (6,109)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of business.................................................... (92,342)
Depreciation and amortization............................................... 31,108
Gain on sale of assets...................................................... (9,425)
Increase (decrease) in cash resulting from changes in listed items:
Inventory................................................................. (1,119)
Pre-opening costs......................................................... (6,653)
Accounts receivable....................................................... 5,028
Other assets.............................................................. (879)
Accounts payable.......................................................... 2,489
Accrued liabilities....................................................... 3,168
---------
Net cash used in operating activities................................... (74,734)
---------
Cash flows from investing activities:
Additions to property, plant and equipment.................................... (100,499)
Proceeds on sale of assets.................................................... 27,000
---------
Net cash used in investing activities................................... (73,499)
---------
Cash flows from financing activities:
Proceeds from notes payable................................................... 159,493
Principal payments on notes payable........................................... (12,493)
Increase in due to stockholders............................................... 8,020
Distributions to stockholders................................................. (7,164)
Excess of checks written over funds on deposit................................ 377
---------
Net cash provided by financing activities............................... 148,233
---------
Net increase in cash.................................................... --
Cash at beginning of year....................................................... 400
---------
Cash at end of year............................................................. $ 400
---------
---------
</TABLE>

See accompanying notes to financial statements.

F-29
<PAGE>
CENTRAL & RIDGE YOGURT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995

(1) OPERATIONS
Central & Ridge Yogurt, Inc. (the Company) operates a restaurant as a
franchisee of New York Bagel Enterprises, Inc. (Franchisor) under the New York
Bagel concept which is a quick-service bakery featuring freshly made bagels and
deli-style sandwiches. The Company's restaurant is located in Wichita, Kansas.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) FRANCHISE FEES

A franchise agreement has been executed between the Company and the
Franchisor that provides the terms of the franchise arrangement. The initial
franchise fee is being amortized on a straight-line basis over the term of the
agreement.

(b) INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.

Direct, incremental restaurant pre-opening costs, comprised primarily of the
cost of hiring and training restaurant employees and rent, are amortized over
the initial twelve months of the restaurant's operations.

(d) PROPERTY, PLANT AND EQUIPMENT

(e) INCOME TAXES

The Company operates as an S corporation for income tax purposes. Income
taxes have not been provided because the Company's results of operations are
reported to its stockholders for inclusion in their individual tax returns.

(f) STATEMENT OF CASH FLOWS

Cash paid during the year for interest was $15,744.

(g) USE OF ESTIMATES

(3) PROPERTY, PLANT AND EQUIPMENT
Depreciation expense amounted to $26,882 for the year ended December 31,
1995.

(4) LEASES
The Company leases its present restaurant facility under a noncancelable
operating lease. The lease term expires in February 1998 and contains a renewal
option for an additional three-year period. Total rent expense for the year
ended December 31, 1995 was $23,629.

F-30
<PAGE>
CENTRAL & RIDGE YOGURT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995

(4) LEASES (CONTINUED)
Future minimum lease payments under the noncancelable operating lease as of
December 31, 1995 are:

<TABLE>
<S> <C>
Year ending December 31:
1996............................................................ $ 18,600
1997............................................................ 18,600
1998............................................................ 19,050
1999............................................................ 19,200
2000............................................................ 19,200
Thereafter...................................................... 4,800
---------
Total minimum lease payments.................................... $ 99,450
---------
---------
</TABLE>

(5) SALE OF BUSINESS
Effective after the close of business on December 31, 1995, the Company sold
substantially all of its assets to the Franchisor. One of the Company's owners
is also an officer and stockholder of the Franchisor. The gain amounting to
$92,342 arising from such sale has been reflected in the accompanying statement
of operations.

F-31
<PAGE>

[COMPANY LOGO ON MENU.]

[PHOTOGRAPH DEPICTING THE INTERIOR OF A COMPANY RESTAURANT AND VARIOUS COMPANY
PRODUCTS.]

<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
S Corporation Distributions.................... 12
Dividend Policy................................ 12
Use of Proceeds................................ 13
Dilution....................................... 14
Capitalization................................. 15
Selected Combined Financial Data............... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 17
Business....................................... 23
Management..................................... 33
Principal and Selling Stockholders............. 39
Certain Transactions........................... 40
Description of Capital Stock................... 41
Shares Eligible for Future Sale................ 44
Underwriting................................... 45
Legal Matters.................................. 46
Experts........................................ 46
Additional Information......................... 46
Index to Financial Statements.................. F-1
</TABLE>

------------------------

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

2,000,000 SHARES

[LOGO]

NEW YORK BAGEL
ENTERPRISES, INC.

COMMON STOCK
---------------------

PROSPECTUS

---------------------
RAUSCHER PIERCE REFSNES, INC.

J.C. BRADFORD & CO.
, 1996

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is an itemized statement of the estimated expenses to be
incurred in connection with the registration, issuance and distribution of the
Common Stock covered by this Registration Statement, all of which will be paid
by New York Bagel Enterprises, Inc. (the "Registrant"), none of which will be
paid by the Selling Stockholders:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...................... $ 9,518
National Association of Securities Dealers, Inc. Filing Fee.............. 3,260
Nasdaq National Market Application Fee................................... 28,000
Accounting Fees and Expenses............................................. 200,000
Legal Fees and Expenses.................................................. 225,000
Blue Sky Fees and Expenses............................................... 7,500
Transfer Agent/Registrar Fees and Expenses............................... 10,000
Printing Expenses........................................................ 150,000
Miscellaneous Expenses................................................... 66,722
---------
Total.................................................................. $ 700,000
---------
---------
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Registrant is incorporated in Kansas. Under Section 17-6305 of the
Kansas general corporation code, a Kansas corporation has the power, under
specified circumstances, to indemnify its directors, officers, employees and
agents in connection with actions, suits or proceedings brought against them by
a third party, by reason of the fact that they were or are such directors,
officers, employees or agents, against expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred in any action, suit or
proceeding, including attorney fees, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation; and with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The same test applies to actions brought by or in the right of the
corporation with the additional requirement that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Article X of the
Articles of Incorporation, Article VII of the Restated and Amended Articles of
Incorporation to be effective upon the completion of this offering, Sec. 33 of
the Bylaws and Section 60 of the Restated and Amended Bylaws of the Registrant
to be effective upon the completion of this offering, provide for
indemnification of directors and officers to the fullest extent permitted by the
Kansas general corporation code. Reference is made to the Articles of
Incorporation, Restated and Amended Articles of Incorporation, Bylaws and
Restated and Amended Bylaws of the Registrant, filed as Exhibits 3.1, 3.3, 3.2
and 3.4, respectively, hereto.

The Registrant currently does not have directors' and officers' liability
insurance covering certain liabilities incurred by the Registrant's directors
and officers in connection with the performance of their duties.

The Underwriting Agreement contains provisions by which each Underwriter
severally agrees to indemnify the Registrant, any person controlling the
Registrant within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "Act") or Section 20 of the Securities Exchange Act of 1934, each
director of the Registrant, and each officer of the Registrant who signs this
Registration Statement with respect to information relating to such Underwriter
furnished in writing by or on behalf of such Underwriter expressly for use in
the Registration Statement.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The securities sold by the Registrant within the past three years have not
been registered under the Act. Exemption from registration is claimed under
Section 4(2) of the Act in reference to all of such sales of securities. All
securities sold within the past three years were shares of common stock, with
the exception of the Convertible Debenture described below. There were no
underwriting discounts or commissions on the sale of these securities. The
holders of the securities referred to below agreed to take their securities for
investment and not with a view to the distribution thereof. The certificates
representing the securities contained legends identifying certain restrictions
on the transferability thereof.

The following sets forth information pertaining to sales of Common Stock by
the Registrant within the past three years which gives effect to the 1.4-for-1
stock split effected as a stock dividend on June 4, 1996 and the conversion on a
share-for-share basis of Class B Common Stock into Class A Common Stock and the
reclassification of the Class A Common Stock into Common Stock:

<TABLE>
<CAPTION>
PURCHASER DATE (1) SHARES CONSIDERATION
- ---------------------------- ---------------------------- ----------- --------------
<S> <C> <C> <C>
Robert J. Geresi December 31, 1995 627,343 $ 38,885
Paul R. Hoover December 31, 1995 141,698 70,000(2)
Vincent J. Vrana December 31, 1995 584,564 12,880
Paul T. Sorrentino December 31, 1995 627,343 38,885
David L. Murfin December 31, 1995 354,246 175,000(2)
Nancy Murfin Moxley and Mark
A. Moxley December 31, 1995 70,850 35,000(2)
Barbara Murfin Murphy December 31, 1995 70,850 35,000(2)
V. Richard Hoover December 31, 1995 70,850 35,000(2)
Rodney Joe Trizza December 31, 1995 161,951 1,000
Brent E. Durham December 31, 1995 24,217 250
John R. Geresi December 31, 1995 21,389 13,000
Chad E. Watkins December 31, 1995 30,391 25,000
Markus K. Scholler January 1, 1996 14,308 6,500
-----------
2,800,000
-----------
-----------
</TABLE>

- ------------------------
(1) Shares issued on December 31, 1995 were issued in connection with the merger
of New York Bagel Enterprises, Inc., an Oklahoma corporation, into the
Registrant. Shares issued on January 1, 1996 were issued as employee
compensation to the named individual.

(2) An aggregate of $350,000 in consideration was paid for shares in the Prior
Entities, of which $300,000 was paid to Messrs. Geresi, Vrana and Sorrentino
and $50,000 was contributed to the capital of one of the Prior Entities.

On December 14, 1995, the Company issued a 4.0% contingently convertible
subordinated debenture in the amount of $115,000 to The Estate of Stephen Z.
Plotkin, a Tennessee probate estate, in connection with the acquisition of
Nashville Bagel Co., Inc. (the "Convertible Debenture"). The Convertible
Debenture may be converted at the option of the debenture holder into 19,320
shares of Common Stock, in the event the entire debenture is converted.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.+
2.1 Plan and Agreement of Merger dated December 27, 1995, by and between New York Bagel
Enterprises, Inc., a Kansas corporation, and New York Bagel Enterprises, Inc., an
Oklahoma corporation.*
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
<C> <S>
2.2 Plan and Agreement of Merger dated December 27, 1995, by and among New York Bagel
Enterprises, Inc., VPR Incorporated, New York Bagel Shop, Inc., Bagel Boss, Inc., Bagels
of Norman, Inc., New York Bagel Shop & Delicatessen, Inc.*
2.3 Certificate of Ownership and Merger (Articles of Merger) Merging Nashville Bagel Co. (a
Tennessee corporation) into New York Bagel Enterprises, Inc. (an Oklahoma corporation).*
2.4 Asset Sale and Purchase Agreement dated December 27, 1995, by and among New York Bagel
Enterprises, Inc., Central & Ridge Yogurt, Inc. and Paul R. Hoover.*
3.1 Articles of Incorporation of the Registrant.*
3.2 Bylaws of the Registrant.*
3.3 Form of Restated and Amended Articles of Incorporation of the Registrant.
3.4 Form of Restated and Amended Bylaws of the Registrant.*
4.1 Specimen of Common Stock Certificate.
4.2 Form of New York Bagel Enterprises, Inc. Grant of Incentive Stock Option.*
4.3 Form of New York Bagel Enterprises, Inc. Grant of Nonqualified Stock Option.*
4.4 New York Bagel Enterprises, Inc. 4% Convertible and Subordinated Debenture due December
14, 1999.*
5 Opinion of Klenda, Mitchell, Austerman & Zuercher, L.L.C., counsel for the Registrant.
9.1 Contract for Sale of Stock dated June 21, 1994, by and between Robert Geresi, Paul
Sorrentino and Vince Vrana and David L. Murfin and Paul R. Hoover.
9.2 Stockholders' Agreement dated January 1, 1996, by and among Robert J. Geresi, Vincent J.
Vrana, Paul T. Sorrentino, Paul R. Hoover, David L. Murfin, Nancy Murfin Moxley, Mark A.
Moxley, Barbara Murfin Murphy, V. Richard Hoover, Philip Faubert, Rodney Joe Trizza,
Brent Durham, John R. Geresi, Chad E. Watkins, Markus K. Scholler and the Company.*
10.1 New York Bagel Enterprises, Inc. 1996 Incentive Plan.*
10.2 Loan Agreement dated December 26, 1995, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $500,000.
10.3 Loan Agreement dated December 29, 1995, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $2,750,000.
10.4 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $136,800.
10.5 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $136,800.
10.6 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $136,800.
10.7 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $180,800.
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------
<C> <S>
10.8 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $101,600.
10.9 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $107,200.
10.10 Representative Uniform Franchise Offering Circular, including form of Franchise
Agreement and form of Development Agreement.
10.11 Lease Agreement dated June 1, 1994, by and between Bagel Land, Inc. and Bagels of
Norman, Inc.
10.12 Lease Agreement dated December 1, 1993, by and between Cherry Street Land and Bagel
Boss, Inc.
10.13 Sublease dated April 1, 1996, by and between Murfin Drilling Company and New York Bagel
Enterprises, Inc.
10.14 Loan Agreement dated July 8, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $125,000.
10.15 Loan Agreement dated July 8, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $172,500.
10.16 Loan Agreement dated July 10, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $300,000.
10.17 Loan Agreement dated July 15, 1996, by and between New York Bagel Enterprises, Inc. and
Stillwater National Bank and Trust Company in the amount of $150,000.
23.1 Consent of Klenda, Mitchell, Austerman & Zuercher, L.L.C.
23.2 Consent of KPMG Peat Marwick LLP.
24 Powers of Attorney included at page II-6.
</TABLE>

- ------------------------

+To be supplied by amendment.

*Previously filed.

(b) Financial Statement Schedules

Financial statement schedules are not applicable or required.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

II-4
<PAGE>
(c) The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Wichita, State of Kansas, on this 26th day of July, 1996.

NEW YORK BAGEL ENTERPRISES, INC.

By /s/ ROBERT J. GERESI

-----------------------------------

Robert J. Geresi,
CHIEF EXECUTIVE OFFICER AND
PRESIDENT

Pursuant to the requirements of the Securities Act of 1933, as amended, this
amendment to the Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ----------------------------------- ------------------------- ----------------

/s/ ROBERT J. GERESI Chairman of the Board, July 26, 1996
- ----------------------------------- Chief Executive Officer
Robert J. Geresi and President (Principal
Executive Officer)

/s/ J. CHRIS DENNIS Chief Financial Officer, July 26, 1996
- ----------------------------------- Secretary and Treasurer
J. Chris Dennis (Principal Financial and
Accounting Officer)

* Vice President -- New July 26, 1996
- ----------------------------------- Store Development and
Paul T. Sorrentino Director

/s/ PAUL R. HOOVER Vice President -- July 26, 1996
- ----------------------------------- Strategic Planning and
Paul R. Hoover Director

* Director July 26, 1996
- -----------------------------------
William S. Atherton

* Director July 26, 1996
- -----------------------------------
David L. Murfin

*By /s/ ROBERT J.
GERESI
- -----------------------------------
Robert J. Geresi
ATTORNEY-IN-FACT

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
<C> <S> <C>
1 Form of Underwriting Agreement.+
2.1 Plan and Agreement of Merger dated December 27, 1995, by and between New York Bagel
Enterprises, Inc., a Kansas corporation, and New York Bagel Enterprises, Inc., an
Oklahoma corporation.*
2.2 Plan and Agreement of Merger dated December 27, 1995, by and among New York Bagel
Enterprises, Inc., VPR Incorporated, New York Bagel Shop, Inc., Bagel Boss, Inc.,
Bagels of Norman, Inc., New York Bagel Shop & Delicatessen, Inc.*
2.3 Certificate of Ownership and Merger (Articles of Merger) Merging Nashville Bagel Co.
(a Tennessee corporation) into New York Bagel Enterprises, Inc. (an Oklahoma
corporation).*
2.4 Asset Sale and Purchase Agreement dated December 27, 1995, by and among New York
Bagel Enterprises, Inc., Central & Ridge Yogurt, Inc. and Paul R. Hoover.*
3.1 Articles of Incorporation of the Registrant.*
3.2 Bylaws of the Registrant.*
3.3 Form of Restated and Amended Articles of Incorporation of the Registrant.
3.4 Form of Restated and Amended Bylaws of the Registrant.*
4.1 Specimen of Common Stock Certificate.
4.2 Form of New York Bagel Enterprises, Inc. Grant of Incentive Stock Option.*
4.3 Form of New York Bagel Enterprises, Inc. Grant of Nonqualified Stock Option.*
4.4 New York Bagel Enterprises, Inc. 4% Convertible and Subordinated Debenture due
December 14, 1999.*
5 Opinion of Klenda, Mitchell, Austerman & Zuercher, L.L.C., counsel for the
Registrant.
9.1 Contract for Sale of Stock dated June 21, 1994, by and between Robert Geresi, Paul
Sorrentino and Vince Vrana and David L. Murfin and Paul R. Hoover.
9.2 Stockholders' Agreement dated January 1, 1996, by and among Robert J. Geresi,
Vincent J. Vrana, Paul T. Sorrentino, Paul R. Hoover, David L. Murfin, Nancy Murfin
Moxley, Mark A. Moxley, Barbara Murfin Murphy, V. Richard Hoover, Philip Faubert,
Rodney Joe Trizza, Brent Durham, John R. Geresi, Chad E. Watkins, Markus K. Scholler
and the Company.*
10.1 New York Bagel Enterprises, Inc. 1996 Incentive Plan.*
10.2 Loan Agreement dated December 26, 1995, by and between New York Bagel Enterprises,
Inc. and Stillwater National Bank and Trust Company in the amount of $500,000.
10.3 Loan Agreement dated December 29, 1995, by and between New York Bagel Enterprises,
Inc. and Stillwater National Bank and Trust Company in the amount of $2,750,000.
10.4 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $136,800.
10.5 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $136,800.
10.6 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $136,800.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- ------------------------------------------------------------------------------------
10.7 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $180,800.
<C> <S> <C>
10.8 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $101,600.
10.9 Loan Agreement dated March 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $107,200.
10.10 Representative Uniform Franchise Offering Circular, including form of Franchise
Agreement and form of Development Agreement.
10.11 Lease Agreement dated June 1, 1994, by and between Bagel Land, Inc. and Bagels of
Norman, Inc.
10.12 Lease Agreement dated December 1, 1993, by and between Cherry Street Land and Bagel
Boss, Inc.
10.13 Sublease dated April 1, 1996, by and between Murfin Drilling Company and New York
Bagel Enterprises, Inc.
10.14 Loan Agreement dated July 8, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $125,000.
10.15 Loan Agreement dated July 8, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $172,500.
10.16 Loan Agreement dated July 10, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $300,000.
10.17 Loan Agreement dated July 15, 1996, by and between New York Bagel Enterprises, Inc.
and Stillwater National Bank and Trust Company in the amount of $150,000.
23.1 Consent of Klenda, Mitchell, Austerman & Zuercher, L.L.C.
23.2 Consent of KPMG Peat Marwick LLP.
24 Powers of Attorney included at page II-6.
</TABLE>

- ------------------------

+To be supplied by amendment.

*Previously filed.

<PAGE>

RESTATED AND AMENDED ARTICLES OF INCORPORATION

NEW YORK BAGEL ENTERPRISES, INC.

KNOW ALL MEN BY THESE PRESENTS:

NEW YORK BAGEL ENTERPRISES, INC., a Kansas corporation, originally
incorporated on December 27, 1995 (the date of filing of its original Articles
of Incorporation with the Office of the Secretary of State of Kansas), pursuant
to the provisions of K.S.A. 17-6605, hereby adopts restated Articles of
Incorporation and amends its Articles of Incorporation, which restatement and
amendments restate and integrate and also further amend the Articles of
Incorporation.

Such restatement and amendment made by these Restated and Amended Articles
of Incorporation have been effected in conformity with the provisions of K.S.A.
17-6605. At a special meeting of the Board of Directors of said corporation
held on the 16th day of January, 1996, the Board of Directors adopted
resolutions setting forth the restatement and amendments hereafter set out to
the Articles of Incorporation of the corporation.

Thereafter, on June 4, 1996, as evidenced by a stockholders' consent to
action in lieu of a meeting, all of the stockholders who were entitled to vote
on such restatement and amendments approved the same. The number of voting
shares outstanding and entitled to vote on the Restated and Amended Articles of
Incorporation was 1,012,134; stockholders owning 1,012,134 of such shares
consented to such Restated and Amended Articles of Incorporation; and none of
the stockholders withheld consent.

The capital of the corporation will not be reduced under or by reason of
said restatement and amendments.

<PAGE>

The Articles of Incorporation are hereby superseded by the following
Restated and Amended Articles of Incorporation:

The name of the corporation is New York Bagel Enterprises, Inc.

II.

The registered office of the corporation is located at 1600 Epic Center,
301 North Main Street, Wichita, Sedgwick County, Kansas 67202-4888, and the
corporation's resident agent at such address is Gregory B. Klenda.

III.

The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the Kansas general corporation
code.

IV.

The corporation shall have authority to issue shares of capital stock
consisting of the following:

A. Thirty million (30,000,000) shares of common stock, $0.01 par value;
and

B. Five million (5,000,000) shares of preferred stock, no par value.

The Board of Directors is authorized, subject to any limitations prescribed
by law, to provide by resolution or resolutions for the issuance of the
preferred shares in one or more series, to establish the number of shares to be
included in each such series, and to fix the powers, designations, preferences
and the relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of the preferred shares.

A. The number of directors of the corporation shall be as set forth in
the Bylaws of the corporation.

B. The directors of the corporation shall be divided into three (3)
categories as nearly equal in number as possible. Directors initially
elected as Category I directors shall hold office for a term expiring
at the 1997 annual stockholders' meeting. Directors initially elected
as Category II directors shall hold office for a term expiring at the
1998 annual stockholders' meeting, and directors initially elected as
Category III directors shall hold office for a term expiring at the
1999 annual stockholders' meeting. At each annual meeting of
stockholders, the successors

-2-

<PAGE>

to the category of directors whose terms shall then expire shall be
elected to hold office for a term expiring at the third succeeding
annual meeting of stockholders. Each director shall hold office for
the term for which he or she was elected and until his or her
successor is elected and qualified or until his or her earlier
resignation or removal. Any increase or decrease in the authorized
number of directors shall be apportioned by the Board of Directors
among the categories so as to make all categories as nearly equal in
number as possible. A director who is chosen in the manner provided
in the Bylaws to fill a vacancy in the Board of Directors or to fill a
newly-created directorship resulting from an increase in the
authorized number of directors shall hold office until the next
election of the category for which such director shall have been
chosen and until his or her successor is elected and qualified or
until his or her earlier resignation or removal.

C. The elections of directors need not be by written ballot unless the
Bylaws so provide.

VI.

Whenever a compromise or arrangement is proposed between this corporation
and its creditors, or any class of them, or between this corporation and its
stockholders, or any class of them, any court of competent jurisdiction within
the State of Kansas, on the application in a summary way of this corporation or
of any creditor or stockholder thereof or on the application of any receiver or
receivers appointed for this corporation under the provisions of K.S.A. 17-6901,
and amendments thereto, or on the application of trustees in dissolution or of
any receiver or receivers appointed for this corporation under the provisions of
K.S.A. 17-6808, and amendments thereto, may order a meeting of the creditors, or
class of creditors, or of the stockholders, or class of stockholders, of this
corporation, as the case may be, to be summoned in such manner as the court
directs. If a majority in number representing 3/4 in value of the creditors, or
class of creditors, or of the stockholders, or class of stockholders, of this
corporation, as the case may be, agree to any compromise or arrangement in the
reorganization, if sanctioned by the court to which the application has been
made, it shall be binding on all the creditors or class of creditors, or on all
stockholders, or class of stockholders, of this corporation, as the case may be,
and also on this corporation.

VII.

A. The corporation shall indemnify and hold harmless, to the fullest
extent permitted under applicable law as it presently exists or may
hereafter be amended, any person who was or is made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the
fact that such person is or was a director or officer of the
corporation or is or was serving at the request of the corporation as
a director, officer, employee, fiduciary, or agent of another
corporation, partnership, joint venture, trust or other enterprise.

-3-

<PAGE>

B. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under applicable law
as it presently exists or may hereafter be amended.

C. Neither the amendment nor repeal of this Article VII shall eliminate
or reduce the effect of this Article VII in respect of any matter
occurring, or any cause of action, suit or claim that, but for this
Article VII, would accrue or arise prior to such amendment or repeal.

VIII.

Except as set forth in Paragraph C of this Article VIII, the affirmative
vote by at least two-thirds of the outstanding shares of the Voting Stock (as
hereinafter defined) shall be required as a requisite for the approval,
authorization, adoption, or consummation by the Corporation (as hereinafter
defined) of any Business Combination (as hereinafter defined) between the
Corporation and a Related Person (as hereinafter defined). The two-thirds vote
requirement shall be calculated by excluding from the voted shares those which
the Related Person is the Beneficial Owner (as hereinafter defined). Such
affirmative vote shall be in addition to the vote of the holders of the
securities of the Corporation otherwise required by law or by agreement between
the Corporation and any other Person (as hereinafter defined), including, but
not limited to, a national securities exchange.

A. For purposes of this Article VIII, and where expressly indicated
herein for purposes of these Articles of Incorporation, the following
terms shall have the following meanings:

(1) "AFFILIATE." The term "Affiliate" shall mean a Person that,
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the
Person specified.

(2) "ASSOCIATE." The term "Associate" as used to indicate a
relationship with any Person, means (a) any corporation or
organization (other than the Corporation) of which such Person is
an officer or partner, or is, directly or indirectly, the
Beneficial Owner of ten percent (10%) or more of any class of
equity securities; (b) any trust or estate in which such Person
has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; or (c) a
relative or spouse of such Person or any relative of such spouse,
who has the same home as such Person.

(3) "BENEFICIAL OWNER." A Person shall be considered to be the
"Beneficial Owner" of any shares of the Voting Stock (whether or
not owned of record), and any such shares shall be considered to
be "Beneficially Owned" by such Person in the following
circumstances:

-4-

<PAGE>

(a) With respect to which such Person or any Affiliate or
Associate of such Person directly or indirectly has or
shares (i) voting power, including the power to vote or to
direct the voting of such shares of the Voting Stock; or
(ii) investment power, including the power to dispose of or
to direct the disposition of such shares of the Voting
Stock;

(b) Which such Person or any Affiliate or Associate of such
Person has (i) the right to acquire (whether such right is
exercisable immediately or only after the passage of time or
the occurrence of an event or contingency) pursuant to any
agreement, arrangement, or understanding or upon the
exercise of conversion rights, exchange rights, warrants or
options, or otherwise; or (ii) the right to vote pursuant to
any agreement, arrangement, or understanding (whether such
right is exercisable immediately or only after the passage
of time or occurrence of an event or contingency); or

(c) Which are Beneficially Owned within the meaning of
paragraphs (a) or (b) of this definition by any other Person
with which such first-mentioned Person or any Affiliate or
Associate of such Person has any agreement, arrangement, or
understanding, written or oral, with the respect to
acquiring, holding, voting, or disposing of any shares of
the Voting Stock of the Corporation or with respect to
acquiring, holding, or disposing of all or substantially
all, or a Substantial Part (as hereinafter defined) of the
assets or business of the Corporation.

For the purpose only of determining whether a Person is the
Beneficial Owner of a percentage specified in this Article of the
outstanding shares of the Voting Stock, such shares shall be
deemed to include any shares of the Voting Stock that may be
issuable pursuant to any agreement, arrangement, or understanding
or upon the exercise of conversion rights, exchange rights,
warrants, options, or otherwise, and which are deemed to be
Beneficially Owned by such Person pursuant to the foregoing
provisions of this Article.

(4) "BUSINESS COMBINATION." The term "Business Combination" shall
include all of the following except to the extent that any of the
following occur pursuant to the participation of a Related Person
in an employee benefit or compensation plan of the Corporation:

(a) Any merger or consolidation of the Corporation with or into
any Related Person;

-5-

<PAGE>

(b) Any merger or consolidation of a Related Person with or into
the Corporation;

(c) Any sale, exchange, lease, transfer, or other disposition,
in a single transaction or in a series of transactions, of
all or a Substantial Part of the assets of the Corporation
to or with a Related Person;

(d) Any sale, exchange, lease, transfer, or other disposition,
in a single transaction or in a series of transactions, of
all or a Substantial Part of the assets of a Related Person
to or with the Corporation;

(e) The issuance of any securities of the Corporation to a
Related Person;

(f) Any reclassification of securities of the Corporation,
recapitalization of the Corporation, or other transaction
other than a redemption in accordance with the security
redeemed, which has the effect, directly or indirectly, of
increasing the power of a Related Person to vote the Voting
Stock in relation to the voting power of the other
stockholders of the Corporation;

(g) Any partial or complete liquidation, spinoff, splitoff, or
splitup of the Corporation or other transaction with a
similar purpose or effect directly or indirectly involving
any Related Person;

(h) Any transaction or event that is intended by any party
thereto to have, or that is likely to have, a similar effect
as any of the transactions or events described in this
definition of Business Combination; or

(i) Any agreement, contract, commitment, or other arrangement
providing for any of the transactions or events described in
this definition of Business Combination.

(5) "CORPORATION." The term "Corporation" shall mean the entity
organized pursuant to these Articles of Incorporation and, unless
contrary to the express provisions of the reference to that term,
that term shall include all subsidiary corporations or other
entities of which the entity organized pursuant to these Articles
of Incorporation owns, directly or indirectly, a majority of the
equity securities thereof, or otherwise controls.

-6-

<PAGE>

(6) "DATE OF DETERMINATION." The term "Date of Determination" shall
mean:

(a) The date on which a binding agreement (except for the
fulfillment of conditions precedent, including, without
limitation, votes of stockholders to approve such a
transaction) is entered into by the Corporation, as
authorized by its Board of Directors, and another Person
providing for any Business Combination;

(b) If such an agreement as referred to in the preceding
paragraph (a) is amended so as to make it less favorable to
the Corporation and its stockholders, the date on which such
amendment is approved by the Board of Directors of the
Corporation; or

(c) In cases where neither of the preceding paragraph (a) nor
(b) shall be applicable, then the record date for
determination of stockholders of the Corporation entitled to
notice of and to vote upon the transaction in question.

(7) "PERSON." The term "Person" shall mean any individual,
partnership, limited partnership, limited liability partnership,
corporation, limited liability company, trust, syndicate,
association, or other entity, other than the Corporation or a
trustee holding stock for the benefit of the employees of the
Corporation pursuant to one or more employee benefit plans or
arrangements. When two or more Persons act as a partnership,
limited partnership, limited liability partnership, corporation,
limited liability company, trust, syndicate, association, or
other entity for the purpose of acquiring, holding, or disposing
of shares of stock, such partnerships, limited partnerships,
limited liability partnerships, corporations, limited liability
companies, trusts, syndicates, associations, or other entities
shall be deemed to be a single "Person."

(8) "RELATED PERSON." The term "Related Person" shall mean any
Person that (a) is the Beneficial Owner as of the Date of
Determination or at any time thereafter of five percent (5%) or
more of the outstanding shares of Voting Stock; (b) any Person
who is an Affiliate of the Corporation and who at any time within
five years immediately preceding the Date of Determination was
the Beneficial Owner of five percent (5%) or more of the then
outstanding shares of the Voting Stock; or (c) any Associate or
Affiliate of any Person described in (a) or (b) above.

(9) "SUBSTANTIAL PART." The term "Substantial Part" shall mean
assets with a fair market value that is equal to or exceeds
twenty percent (20%) of

-7-

<PAGE>

the fair market value of the total assets of the Corporation or
Person in question as of the end of its most recent previous
fiscal year.

(10) "VOTING STOCK." The term "Voting Stock" shall mean all issued
and outstanding shares of capital stock of the entity organized
pursuant to these Articles of Incorporation that are entitled to
vote for the election of directors by their terms or applicable
law.

B. On the basis of information known to the directors, the Board of
Directors shall have the power and duty to make any determinations
required under this Article by the affirmative vote of a majority of
its members, which determinations shall be conclusive and binding on
the Corporation and all other Persons for purposes of this Article:

(1) Whether any Person is the Beneficial Owner, directly or
indirectly, of five percent (5%) or more of the outstanding
shares of Voting Stock, or is an Affiliate or Associate of
another Person;

(2) Whether any proposed sale, lease, exchange, or other disposition
of part of the assets of the Corporation or any other entity
involves a Substantial Part of that entity's assets;

(3) Whether any series of transactions is a series of transactions
for purposes of this Article;

(4) Whether any transaction or event constitutes a Business
Combination for purposes of this Article;

(5) The Date of Determination relating to any Business Combination;
and

(6) Whether any other definition stated in this Article or any other
provision contained herein is applicable to any transaction,
event, or Person.

C. The provisions of this Article shall not be applicable to a Business
Combination if more than two-thirds of all members of the Board of
Directors of the Corporation then in office shall have expressly
approved such Business Combination by resolution.

IX.

Any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of
the holders of at least two-thirds of the outstanding capital stock of the
corporation at a meeting called for that purpose; provided, however, that if
the Board of Directors, by an affirmative vote of at least two-thirds of all
members of the Board of Directors then in office, recommends removal of a
director or directors to the stockholders, such removal may be effected

-8-

<PAGE>

by the affirmative vote of the holders of at least a majority of the
outstanding capital stock of the corporation at a meeting of
stockholders called for that purpose.

In the manner set forth in the following sentence, the corporation
reserves the right to amend, alter, change or repeal any provision contained
in these Articles of Incorporation in the manner now or hereafter prescribed
by law, and all rights and powers conferred herein on stockholders, directors
and officers are subject to this reserved power. These Articles of
Incorporation may be amended at any annual or special meeting of the
stockholders of the corporation by the affirmative vote of the holders of at
least two-thirds of the outstanding capital stock of the corporation entitled
to vote at a meeting at which a quorum is present in person or by proxy;
provided, however, that if the Board of Directors, by an affirmative vote of
at least two-thirds of all members of the Board of Directors then in office,
recommends the advisability of the amendment, such amendment may be effected
by the affirmative vote of the holders of at least a majority of the
outstanding capital stock of the corporation.

XI.

The Bylaws of the corporation may be adopted, amended or repealed (a) by
the holders of at least a majority of the outstanding capital stock of the
corporation at a meeting at which a quorum is present or (b) by at least a
two-thirds vote of the full Board of Directors.

IN WITNESS WHEREOF, said corporation has caused these presents to be
executed by its President and Secretary this _____ day of _________________,
1996.

NEW YORK BAGEL ENTERPRISES, INC.

ATTEST: By
------------------------------------
Robert J. Geresi, President

- -----------------------------------
J. Chris Dennis, Secretary

-9-

<PAGE>

STATE OF KANSAS )
) ss:
COUNTY OF SEDGWICK )

The foregoing instrument was acknowledged before me this day of
, 1996, by Robert J. Geresi and J. Chris Dennis, President and
Secretary, respectively, of New York Bagel Enterprises, Inc., a Kansas
corporation, on behalf of the corporation.

----------------------------------------
Notary Public

My Appointment Expires:

- -----------------------------------

-10-

<PAGE>

[LOGO]
NUMBER SHARES
C

INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF KANSAS NEW YORK BAGEL ENTERPRISES, INC. CUSIP 64938P 10 7

THIS CERTIFIES THAT

IS THE OWNER OF

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF

NEW YORK BAGEL ENTERPRISES, INC.

transferable on the books of the Corporation upon surrender of this
certificate properly endorsed. This Certificate is not valid until
countersigned by he Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

Dated:
[SEAL]
/s/ J. CHRIS DENNIS /s/ ROBERT J. GERESI
SECRETARY CHAIRMAN

COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
TRANSFER AGENT AND REGISTRAR
BY

AUTHORIZED SIGNATURE

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional, or other special rights of each class or stock or series thereof of
the Corporation and the qualifications, limitations or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or to
the transfer agent.

The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:

<TABLE>
<S> <C> <C>
TEN COM-as tenants in common UNIF GIFT MIN ACT-______Custodian_______ UNIF TRAN MIN ACT-______Custodian_______
TEN ENT-as tenants by the entireties (Cust) (Minor) (Cust) (Minor)
JT TEN -as joint tenants with right under Uniform Gifts to Minors under Uniform Transfers to Minors
of survivorship and not as Act_______ Act_______
tenants in common (State) (State)
TOD -transfer on death direction
in event of owner's death, to
person named on face
</TABLE>

Additional abbreviations may also be used though not in the above list.

For Value Received, ______________________hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

______________________________________

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

__________________________________________________________________________shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated_____________________________

SIGNATURE GUARANTEED: ________________________________________

_________________________________ ________________________________________
NOTICE: THE SIGNATURE(S) MUST BE NOTICE: THE SIGNATURE TO THIS
GUARANTEED AND THE GUARANTOR MUST ASSIGNMENT MUST CORRESPOND WITH
BE ACCEPTABLE TO THE TRANSFER AGENT. THE NAME AS WRITTEN UPON THE FACE
OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER.

<PAGE>

EXHIBIT 5

[LETTERHEAD]

July 26, 1996

Board of Directors
New York Bagel Enterprises, Inc.
300 I.M.A. Plaza
250 North Water Street
Wichita, KS 67202

Gentlemen:

In connection with the registration by New York Bagel Enterprises, Inc. (the
"Company") on Form S-1, Registration No. 333-05785 (the "Registration
Statement"), providing for the registration under the Securities Act of 1933, as
amended, of 2,300,000 shares (the "Shares") of the Company's Common Stock, $0.01
par value (the "Common Stock"), of which 1,800,000 Shares are being sold by the
Company (2,070,000 if the over-allotment option granted to the underwriters is
exercised in full), and 200,000 Shares are being sold by certain stockholders
(the "Selling Stockholders") of the Company (230,000 if the over-allotment
option granted to the underwriters is exercised in full), we are furnishing the
following opinion as counsel to the Company.

We have examined such corporate records, certificates of public officials and
officers of the Company, and other documents and records as we have considered
necessary or proper for the purpose of this opinion.

Based upon the foregoing, and having regard to legal considerations that we deem
relevant, we are of the opinion that the foregoing Shares of the Company, when
issued in the manner described in the Registration Statement, after the same
becomes effective, and in accordance with the securities laws of the various
states in which the Common Stock may be issued, will be validly issued, fully
paid and non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

/s/ KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.

KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.

<PAGE>

CONTRACT FOR SALE OF STOCK

THIS Contract is made and entered into as of the 21st day of June, 1994, by
and between Robert Geresi, Paul Sorrentino and Vince Vrana, collectively
hereinafter referred to as "Sellers Group", and David L. Murfin and Paul R.
Hoover, collectively hereinafter referred to as "Buyers Group", for the purpose
of setting for the terms and conditions of the sale of a portion of the Stock of
New York Bagel Enterprises, Inc., an Oklahoma corporation, hereinafter referred
to as "NYBE".

WHEREAS, Sellers Group currently owns all outstanding stock of NYBE, which
is a corporation engaged in, among other things, the sale and marketing of
franchises featuring the name "New York Bagel Shop and Delicatessen"; and

WHEREAS, Sellers Group currently manages and directs all such franchising
activities of NYBE; and

WHEREAS, Buyers Group desires to invest their funds in NYBE and to take an
active role in the franchising and development efforts of NYBE.

NOW, THEREFORE, in consideration of the mutual promises, covenants, and
conditions contained herein, together with good and valuable consideration, the
adequacy of which is hereby acknowledged, the parties agree as follows:

1. SALE OF STOCK. The Sellers Group agrees to sell to the Buyers Group
one-half (1/2) of the outstanding shares of stock owned by each such member of
the Seller Group in NYBE to Buyers Group for the following consideration:

a. The sum of Three Hundred Thousand Dollars ($300,000), paid to
Sellers Group; and

b. The payment of Fifty Thousand Dollars ($50,000) to NYBE, such
funds to be used and applied for the purpose of providing salaries for
employees, expanding and upgrading existing office facilities and equipment
of the office of NYBE currently located in Stillwater, Oklahoma, and for
the purchase of marketing material, brochures, pamphlets, and the payment
of professional fees incurred in regard to the operation of the business.

- 1 -

<PAGE>

2. REPRESENTATIONS AND WARRANTIES OF SELLERS GROUP. Each of Sellers Group
jointly and severally represents and warrants to Buyers Group as follows:

a. ORGANIZATION, GOOD STANDING, AND AUTHORITY. NYBE is a company
duly organized, validly existing, and in good standing under the laws of
the state of Oklahoma, and has all requisite corporate power and authority
to conduct its business as it is now conducted, to own its properties and
assets, and to lease properties used in its business. NYBE has no
subsidiaries. NYBE is not in violation of its certificate of incorporation
or its bylaws, or of any applicable law in any material respect, or in
default with respect to any material agreement, indenture, lease, or other
document to which it is a party or by which it is bound.

b. BINDING OBLIGATIONS; DUE AUTHORIZATION. This Contract
constitutes the valid and binding obligations of each of Sellers Group and
Buyers Group, enforceable against each of them in accordance with the terms
hereof.

c. ABSENCE OF DEFAULT. The execution and the delivery of this
Contract, the sale of the shares of stock of NYBE and the consummation of
the other transactions contemplated hereby, and the fulfillment of the
terms hereof, will not (1) conflict with, or result in a breach of the
terms, conditions, or provisions of, or constitute a default under the
certificate of incorporation or bylaws of NYBE or under any agreement or
instrument under which NYBE or any of the Sellers Group is obligated, or
(2) violate any law to which NYBE or any of the Sellers Group is subject.

d. CAPITALIZATION; OWNERSHIP OF SHARES. NYBE is authorized to issue
10,000 shares of common stock, par value $1.00, of which 300 shares are
issued and outstanding. All of such issued and outstanding shares are
validly issued, fully paid, and nonassessable. The Sellers Group are the
owners of the following number of such issued and outstanding shares:

Robert Geresi 100 shares
Paul Sorrentino 100 shares
Vince Vrana 100 shares

and each of Sellers Group is the owner of such shares, free and clear of
all encumbrances, liens, security interests, and claims whatsoever. Upon
delivery of, and

- 2 -

<PAGE>

payment for, 1/2 of the shares of stock of NYBE as provided in this
Contract, the Buyers Group will acquire good and valid title to such
shares, free and clear of all security interests, liens, and encumbrances,
charges, pledges, restrictions, assessments, adverse claims, or other
limitations of any kind.

e. CHARTER DOCUMENTS. True and correct copies of the certificate of
incorporation and bylaws of NYBE, with all amendments thereto, are attached
hereto as Exhibit "2.e".

f. OPTIONS, WARRANTS, AND OTHER RIGHTS. NYBE does not have
outstanding any options, warrants, or rights of any kind requiring it to
sell or issue to anyone any shares of its capital stock and NYBE has not
agreed to issue or sell any additional shares of its capital stock.

g. PERSONAL PROPERTY. NYBE has good and marketable title to all of
its personal property of every kind, tangible or intangible, contained in
its offices and other facilities (other than leased properties) or shown as
assets in its records and books of account, free and clear of all liens,
encumbrances, and charges.

h. TAXES. NYBE has filed all tax returns and reports required to be
filed with the United States of America and with all states and political
subdivisions thereof where any such returns or reports are required to be
filed and where the failure to file such return or report would subject
NYBE to any material liability or penalty. All taxes imposed by the
United States of America, or by any state, municipality, subdivision, or
instrumentality of the United States, or by any other taxing authority,
which are due and payable by NYBE has been paid in full or adequately
provided for by reserves shown in the records and books of account of NYBE.
No extension of time for the assessment of deficiencies for any years is in
effect. None of the Sellers Group or NYBE has any knowledge of any
unassessed tax deficiency proposed or threatened against any of them.

i. LABOR RELATIONS; EMPLOYEES. NYBE is not a party to or affected
by any collective bargaining agreement, nor is NYBE a party to any pending
or threatened labor dispute, organizational efforts, or labor negotiations.
NYBE has complied with all applicable laws relating to the employment of
labor. NYBE does not have any written or oral retirement,

- 3 -

<PAGE>

pension, profit sharing, stock option, bonus, or other employee benefit
plan or practice. NYBE does not have any employee whose employment is not
terminable at will without severance pay or other penalty or
compensation.

j. GOVERNMENT AUTHORIZATIONS. NYBE has all permits, charters,
licenses, orders, and approvals of, and made all necessary registrations
and other filings with, every national, state, local, or foreign
governmental or regulatory body required in order to permit it to carry on
its business substantially as presently conducted. All such licenses,
permits, charters, orders, registrations, filings, and approvals are in
full force and effect, and, to the knowledge of the Sellers Group or NYBE,
no suspension or cancellation of any of them is threatened and neither the
Sellers Group nor NYBE knows of any fact or circumstance that will
interfere with or adversely affect the renewal of any of such licenses,
permits, charters, orders, registrations, filings, or approvals; and none
of such permits, charters, licenses, orders, registrations, filings, and
approvals will be affected by the consummation of the transactions
contemplated by this Contract.

k. LITIGATION. NYBE is not a party to any pending litigation, nor
to the knowledge of any of the Sellers Group or NYBE, is any litigation
threatened to which NYBE is or would be a party or to which any of its
assets is or would be subject.

l. BROKERS OR FINDERS. Except as otherwise provided in this Section
2.1, no broker, agent, finder, consultant, or other party has been retained
by NYBE or any of the Sellers Group or Buyers Group or is entitled to be
paid based upon any agreements, arrangements, or understandings made by
NYBE or any of the Sellers Group or Buyers Group in connection with any of
the transactions contemplated by this Contract. Buyers Group specifically
acknowledges the existence of a contractual agreement with Alan Hermann
regarding the development of NYBE franchises within the State of New Mexico
(the "New Mexico Development Contract") and that the New Mexico Development
Agreement constitutes an obligation of NYBE.

m. INTANGIBLE PROPERTY. Exhibit "2.m" to this Contract sets forth a
list of each item of intellectual property used in the business of NYBE,
including, without limitation, computer software, patents, trademarks,
trade

- 4 -

<PAGE>

names, service marks, copyrights, designs, patterns, methods, inventions,
and know-how related thereto, all pending applications therefor, and all
private licenses to use any of the foregoing (all property of the foregoing
type being hereinafter collectively referred to as "Licenses"). Except as
expressly set forth in Exhibit "2.m" to this Contract, NYBE owns, free and
clear of all liens and encumbrances, all title and interest in, and right
and authority to use, all Licenses listed on such exhibit as owned by them,
and NYBE is duly licensed to use all other Licenses listed thereon. The
use of the Licenses listed on such exhibit by NYBE does not in any material
respect conflict with, infringe upon, or violate any such rights of any
other person, nor has any of the Sellers Group or NYBE received any notice
of any such conflict, infringement, or violation. Neither any of the
Sellers Group or NYBE has any knowledge of any third party violating or
infringing upon any License.

n. NO MISREPRESENTATIONS. Neither this Contract nor any other
letter, certificate, statement, or document furnished or to be furnished to
Buyers Group by or on behalf of the Sellers Group or NYBE, or any of them,
pursuant to or in connection with this Contract and the transactions
contemplated hereby, when considered in conjunction with all other
information and documents furnished to Buyers Group hereunder, contains or
will contain any misstatement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein not misleading.

o. UPDATING OF REPRESENTATIONS AND WARRANTIES. Between the date
hereof and the closing of this transactions contemplated by this Contract,
the Sellers Group will promptly disclose to Buyers Group in writing any
information of which any of them has actual knowledge (1) concerning any
event that would render any representation or warranty of the Sellers Group
untrue if made as to the date of such event, (2) which renders any
information set forth in this Contract or an exhibit hereto no longer
correct in all material respects, or (3) which arises after the date hereof
and which would have been required to be included in this Contract or an
exhibit hereto, if such information had existed on the date hereof.

p. TRUE AT CLOSING. Except as otherwise specifically provided in
this Contract, all of the representations and warranties set forth above
will be

- 5 -

<PAGE>

true and correct at the time and date of the closing with the same force
and effect as though such representations and warranties had been made at
the time and date of closing.

3. SELLERS GROUP'S DUTIES AND RIGHTS.

a. No later than ten (10) days prior to Closing, Sellers Group shall
deliver to Buyers Group a current list of any and all debts and liabilities
of NYBE. On or before Closing, Sellers Group shall cause all such debts
and liabilities to be paid in full. Sellers Group shall receive a
distribution of all cash on hand as of the date of Closing, it being the
intent of the parties that immediately subsequent to Closing NYBE shall be
free of debt or financial obligations of any kind and shall have no cash on
hand, except as may be paid at Closing by Buyers Group, pursuant to this
Contract.

b. Sellers Group shall retain and control all right, title and
interest in and to the following NYBE stores described in Exhibit 3.b
attached hereto and incorporated herein by reference (the "Sellers'
Stores").

Prior to the Closing, Sellers Group and NYBE shall enter into written
franchise agreements covering all of the Sellers' Stores in form and
substance acceptable to Buyer's Group, it being understood that Sellers
Group shall have no obligation whatsoever to pay royalties or any other
fees to NYBE or to Buyers Group on Sellers' Stores; provided, in the event
NYBE establishes a marketing fund, and fees are assessed against all then-
existing franchises of NYBE, then, in that event, Sellers' Stores shall be
subject to the same requirements for contribution as would any franchise,
provided, that the maximum amount which Sellers Group shall be required to
contribute will not exceed one and one-half percent (1.5%) of the gross
sales of any such store. It is further agreed that Sellers Group shall
have the right to relocate any or all such Sellers' Stores within the State
of Oklahoma and/or Sedgwick County, Kansas, including both present and
future stores, as the case may be, and that the relocation of any such
store by Sellers Group shall not create or establish any obligations
hereunder, nor cause any such store to be subject to the payment of
royalties or other fees, other than as specifically provided in this
Section 3.b. It is also understood and agreed that in the event NYBE shall
be dissolved as a corporation, Sellers Group shall have the right to use

- 6 -

<PAGE>

the names "New York Bagel Enterprises", "New York Bagel Shop", "New York
Bagel Shop and Delicatessen", "Bagel Boss", and "Bagel Boys" in connection
with Sellers' Stores or Sellers Group's future additional stores within the
State of Oklahoma and Sedgwick County, Kansas in accordance with the terms
and provisions of the franchise agreements for such stores.

c. Sellers Group shall be entitled to receive a payment of all
initial franchise fees (whether collected prior to or after the date of
Closing), and all royalties due to NYBE prior to the Effective Date, as
defined in Section 4 below, for the following franchised stores:

1. Woodland Mills Mall, Tulsa, Oklahoma
2. Omaha, Nebraska
3. Knoxville, Tennessee
4. West Wichita, Kansas
5. Highland Park, Dallas, Texas
6. Kansas City, Kansas
7. Austin, Texas
8. Denver, Colorado
9. Portland, Oregon
10. Little Rock, Arkansas

Notwithstanding any other terms or conditions contained herein, Sellers
Group shall be entitled to cause NYBE to assign the franchise fees and
royalties described above in this Section 3.c to VPR, Inc. Upon receipt of
all such franchise fees, together with the completion of the ten day on-
site period for each such store, Sellers Group shall be entitled to
distribution of all such proceeds then remaining, free and clear of any
rights or interests of Buyers Group or NYBE. Royalties due from the
above-referenced stores subsequent to the Effective Date and all fees and
royalties for additional locations within these markets shall be the
property of NYBE.

d. Sellers Group agrees that as to the six future franchised stores
to be located in Highland Park, Dallas, Texas, Kansas City, Kansas, Austin,
Texas, Denver, Colorado, Portland, Oregon and Little Rock, Arkansas,
respectively, that, in the event NYBE should provide operational and/or
marketing services prior to the end of the ten day on-site training period
for the benefit of any such store, then, and in that event, Sellers Group
shall pay any costs incurred in providing same.

- 7 -

<PAGE>

e. Sellers Group agrees that all fees, royalties, and other benefits
to be received in connection with the New Mexico Development Contract shall
be the sole property of NYBE.

f. Prior to the closing, Sellers Group shall not permit NYBE to,
except with the prior written consent of Buyers Group or as otherwise
provided in this Contract:

(1) Amend its certificate of incorporation, bylaws, or
other charter documents, make any change in its authorized,
issued, or outstanding capital stock, grant any options or right
to acquire shares of any class of its capital stock or any
security convertible into any class of capital stock, purchase,
redeem, retire, or otherwise acquire any shares of any class of
its capital stock or any security convertible into any class of
its capital stock, or agree to do any of the foregoing;

(2) Adopt, enter into, or amend materially any employment
contract or any bonus, stock option, profit sharing, pension,
retirement, incentive, or similar employee benefit program or
arrangement or grant any salary or wage increase;

(3) Incur any indebtedness for borrowed money or assume,
guarantee, endorse, or otherwise as an accommodation become
liable or responsible for obligations of any other individual,
firm, or corporation;

(4) Mortgage, pledge, or subject to lien or other
encumbrance any of its properties or assets;

(5) Sell or transfer any of its properties or assets or
cancel, release, or assign any indebtedness owed to it or any
claims held by it;

(6) Enter into any other agreement not in the ordinary and
usual course of business;

(7) Merge or consolidate with any other corporation,
acquire any capital stock,

- 8 -

<PAGE>

solicit any offers for any capital stock of NYBE, or a
substantial portion of the assets of NYBE or, except in the
ordinary course of business, acquire any assets of any other
person, corporation, or other business organization, or enter
into any discussions with any person concerning, or agree to do,
any of the foregoing; or

(8) Enter into any transaction or take any action which
would, if effected prior to the closing, constitute a breach of
any of the representations, warranties, or covenants contained in
this Contract.

g. Prior to the closing, Sellers Group shall cause NYBE to conduct
its respective business in the ordinary and usual course as heretofore
conducted and to use its best efforts (1) to preserve its business and
business organization intact, (2) to keep available to NYBE the services of
the present officers and employees of NYBE, (3) to preserve the good will
of customers, franchisees, and others having business relations with NYBE,
(4) to maintain NYBE's properties in customary repair, working order and
condition (reasonable wear and tear excepted), (5) to comply with all laws
applicable to it and the conduct of its business, (6) to keep in force at
not less than their present limits all existing policies of insurance, (7)
to make no material changes in the customary terms and conditions upon
which it does business, (8) to duly and timely file all reports, tax
returns, and other documents required to be filed with national, state,
local, and other authorities, and (9) unless it is contesting the same in
good faith and has established reasonable reserves therefor, to pay when
required to be paid all taxes indicated by tax returns so filed or
otherwise lawfully levied or assessed upon it or any of its properties and
to withhold or collect and pay to the proper governmental authorities or
hold in separate bank accounts for such payment all taxes and other
assessments which it believes in good faith to be required by law to be so
withheld or collected.

h. Each of Sellers Group shall use their best efforts in good faith
to do any and all acts and things reasonably deemed by Buyers Group or
Sellers Group to be necessary or appropriate in order to cause the purchase
of the shares to be consummated on the terms provided herein as promptly as
practicable.

- 9 -

<PAGE>

i. Each of Sellers Group agrees not to sell, pledge, encumber, or
otherwise hypothecate or transfer any shares of common stock of NYBE prior
to the closing.

4. CLOSING. Closing shall be held on or before July 15, 1994, at 2:00
p.m. in the offices of Hert & Baker, P.C., 222 East Seventh, Stillwater,
Oklahoma, or at such other time and place as the parties may otherwise agree,
but upon the occurrence of the Closing on such date the consummation of the sale
and transfer of such stock shall be deemed to have occurred at 12:01 a.m., July
1, 1994 (the "Effective Date").

5. FRANCHISE REVIEW COMMITTEE. All applications for new franchises of
NYBE shall be reviewed by a "Franchise Review Committee" and the Board of
Directors of NYBE, as elected subsequent to Closing, shall initially serve as
the Franchise Review Committee, until such time as the Board may determine
otherwise.

6. RESTRICTIONS ON SALE OF STOCK UPON DEATH, ETC. The parties agree that
the fair market value of the Stock of NYBE shall be established not less often
than July 1 of each year (the "Agreed Fair Market Value"). The initial
valuation of the Agreed Fair Market Value of the stock of NYBE for the period
ending June 30, 1995 is $2,000.00 per share. In the event of the death,
disability or incapacitation of one or more of the parties hereto, the parties
agree that the Stock owned by such party shall be purchased as follows:

a. In the event that one or more of the members of Sellers Group
should die, then, in that event, for a period of 45 days following the
death of such member or members, the remaining members of Sellers Group
shall have the option to purchase all stock owned by the deceased member of
Sellers Group at the Agreed Fair Market Value, as determined as of July 1
of the year immediately prior to the death of said member of Sellers Group.
In the event that the remaining members of Sellers Group decline to
purchase such Stock within such period, then for a period of 45 days, the
Buyers Group shall have the right to purchase said stock at the Agreed Fair
Market Value.

b. In the event that all of the Sellers Group and all of the Buyers
Group decline to purchase said Stock, the personal representative of the
estate of the deceased stockholder shall have the right to offer said Stock
for sale to third parties; provided, that should said personal
representative obtain an offer, then, in that

- 10 -

<PAGE>

event, the remaining stockholders shall have the first right of refusal, in
the same manner as above stated.

c. In the event that one or more of the members of Buyers Group
should die, the procedures outlined in paragraphs (a) and (b) above shall
be followed, it being the intent of the parties that the Sellers Group and
Buyers Group shall be accorded the same rights, duties, and obligations in
regard to the sale of Stock under this Section 6.

d. In the event that a stockholder should be disabled or
incapacitated, as determined by such physician(s) as may be attending to or
treating such stockholder, the above and foregoing procedures shall be used
in regard to the sale of stock of such stockholder.

7. OTHER RESTRICTIONS ON TRANSFER. Before any share of stock in NYBE may
be sold by any member of Sellers Group to any person, it must first be offered
for sale to the remaining members of Sellers Group by written notice served by
the selling stockholder, such notice to specify the number of shares offered for
sale and the price and terms at which it is proposed to sell them. At any time
within 30 days after the service of such notice, the remaining members of
Sellers Group may elect to purchase any or all of such shares of stock by paying
the selling stockholder the price per share in accordance with the terms
specified by such notice. In the event that the remaining members of Sellers
Group fail to exercise their option as to all of such shares, the members of
Buyers Group may, at any time within a period of 30 days following the
expiration of said initial 30-day option period, elect to purchase any or all of
the remaining shares of stock so available for purchase by paying the selling
stockholder the price per share in accordance with the terms specified by said
notice; PROVIDED, HOWEVER, that if any member of Buyers Group elects to purchase
any of such shares, the remaining members of the Sellers Group shall have ten
days after such election to purchase such shares. If Sellers Group fails to
purchase such shares within said ten-day period, Buyers Group shall have the
right to complete the purchase of such shares. Any such available shares of
stock that the stockholders fail to purchase in the time and manner aforesaid
may then be offered to any person by such selling stockholder; PROVIDED,
HOWEVER, should the selling stockholder obtain an offer, then in that event, the
remaining stockholders shall have the first right of refusal with respect to the
shares subject to such offer in the same manner as above stated, such procedure
to be commenced by the selling stockholder. delivering written notice to the
remaining members of Sellers Group specifying the number of shares offered for
sale, the name of the purchaser, and the price and

- 11 -

<PAGE>

terms at which it is proposed to sell the shares. If such sale is not effected
within 6 months following the expiration of the combined 70-day option period
set out above, none of such stock may be sold to any party at any price without
again complying with the aforesaid procedure, in the same manner as if such
stock had never before been offered for sale to the other stockholders as
described above.

Before any share of stock in NYBE may be sold by any member of Buyers Group
to any person, it must first be offered for sale to the remaining members of
Buyers Group by written notice served by the selling stockholder, such notice to
specify the number of shares offered for sale and the price and terms at which
it is proposed to sell them. At any time within 30 days after the service of
such notice, the remaining members of Buyers Group may elect to purchase any or
all of such shares of stock by paying the selling stockholder the price per
share in accordance with the terms specified by such notice. In the event that
the remaining members of Buyers Group fail to exercise their option as to all of
such shares, the members of Sellers Group may, at any time within a period of 30
days following the expiration of said initial 30-day option period, elect to
purchase any or all of the remaining shares of stock so available for purchase
by paying the selling stockholder the price per share in accordance with the
terms specified by said notice; PROVIDED, HOWEVER, that if any member of Sellers
Group elects to purchase any of such shares, the remaining members of the Buyers
Group shall have ten days after such election to purchase such shares. If
Buyers Group fails to purchase such shares within said ten-day period, Sellers
Group shall have the right to complete the purchase of such shares. Any such
available shares of stock that the stockholders fail to purchase in the time and
manner aforesaid may then be offered to any person by such selling stockholder;
PROVIDED, HOWEVER, should the selling stockholder obtain an offer, then in that
event, the remaining stockholders shall have the first right of refusal with
respect to the shares subject to such offer in the same manner as above stated,
such procedure to be commenced by the selling stockholder delivering written
notice to the remaining members of Buyers Group specifying the number of shares
offered for sale, the name of the purchaser, and the price and terms at which it
is proposed to sell the shares. If such sale is not effected within 6 months
following the expiration of the combined 70-day option period set out above,
none of such stock may be sold to any party at any price without again complying
with the aforesaid procedure, in the same manner as if such stock had never
before been offered for sale to the other stockholders as described above.

Notwithstanding any provision in this Contract to the contrary, Buyers
Group shall have the right to sell not more than

- 12 -

<PAGE>

50% of the shares purchased hereunder to a third party who has been approved in
advance by Sellers Group without complying with the right of first refusal and
other transfer provisions of this Contract, and upon such transfer, the approved
third party shall become a member of "Buyers Group."

8. DUE DILIGENCE REVIEW; NONDISCLOSURE. Prior to the closing, Sellers
Group shall give, and shall cause NYBE to give, Buyers Group and its counsel and
accountants full access, during normal business hours and upon reasonable
notice, to the respective properties, books, and records of NYBE and Sellers'
Stores, and to furnish Buyers Group during such period with all such information
concerning the affairs of NYBE and Sellers' Stores as Buyers Group may
reasonably request. The availability or actual delivery of information shall
not affect the covenants, representations, and warranties of the Sellers Group
contained in this Contract. Buyers Group shall treat as confidential all such
information in the same manner as Buyers Group treats similar confidential
information of its own and, if this Contract is terminated, Buyers Group shall
continue to treat all such information obtained in such investigation and not
otherwise known to Buyers Group, or already in the public domain, as
confidential and shall return such documents theretofore delivered by the
Sellers Group to Buyers Group as the Sellers Group shall request. If in
connection with Buyers Group's due diligence and review of the business affairs
of NYBE, the Buyers Group, in its sole discretion, finds that it would not be
advisable for it to consummate the transactions contemplated by this Contract,
Buyers Group may terminate this Contract, without incurring any liability to
Sellers Group or NYBE, by directing notice of such termination to Sellers Group
prior to the Closing.

9. EXISTING FRANCHISES/STORES. Sellers' Stores shall remain the sole
property of Sellers Group and shall not be subject to any royalty or franchise
fees, and Sellers Group shall likewise retain the exclusive right to develop and
open additional stores in Oklahoma or Sedgwick County, Kansas, without any
obligation whatsoever to pay royalties or franchise fees, however, any and all
such stores shall be subject to the payment of a marketing fee, with a one and
one-half percent (1.5%) cap, all as set forth hereinabove. If the Sellers Group
decides to allow a third party to have a franchised store within said exclusive
areas, such franchisee shall be through NYBE, such franchisee must be approved
by NYBE, and all fees and royalties associated with or related to the franchised
store and franchisee shall be the sole property of NYBE.

10. MANAGEMENT CONTROL. The parties agree that the Board of Directors
shall have the normal and customary duties and responsibilities of running the
business of NYBE, however, it is

- 13 -

<PAGE>

the intention of the parties that Sellers Group concentrate their efforts for
NYBE in regard to the training of potential franchisees and the actual operation
of the stores, while Buyers Group shall focus their efforts towards the
attraction of qualified applicants for franchises, the development of strategic
plans for the growth of NYBE, providing support which will permit immediate and
rapid growth of NYBE, and expanding the marketing operations of NYBE throughout
the United States provided, that it is understood and agreed that the parties
shall not be required to devote their full time and energy to the business of
NYBE. It is further understood and agreed that any and all strategic corporate
decisions shall be made by a majority vote of the Board of Directors. Any and
all new franchises shall be reviewed and approved by a majority vote of the
Board of Directors and/or the Franchise Review Committee. The parties further
agree that, as deemed appropriate and necessary, the Board of Directors shall be
empowered to employ and establish appropriate compensation for a manager or
management team.

11. CHANGE IN ARTICLES AND BYLAWS. The parties agree that subsequent to
Closing, and upon transfer of Sellers Group's stock to Buyers Group as
contemplated herein, that special meetings of the stockholders and directors of
NYBE shall be called, for the purpose of electing officers and directors,
amending the articles and bylaws of NYBE so as to incorporate therein the terms
and conditions of this Contract, and providing for the Board of Directors of
NYBE to consist of six members, with cumulative voting to be in effect in all
elections of directors of NYBE. The parties further acknowledge and agree that
the current proposed initial directors of NYBE to be elected at such special
meeting of the stockholders are as follows:

Robert Geresi
Paul Sorrentino
Vince Vrana
David L. Murfin
Paul R. Hoover
an individual to be selected by Buyers Group

and that the current proposed initial officers of NYBE to elected at such
special meeting of the Board of Directors are as follows:

President - Robert Geresi
Vice President - Paul Sorrentino
Vice President - Vince Vrana
Vice President - David L. Murfin
Vice President - Paul R. Hoover
Secretary/Treasurer - Robert D. Young

- 14 -

<PAGE>

12. CORPORATE STATUS. The parties hereto acknowledge that NYBE is
presently recognized as a "S" corporation, and the parties do further agree that
until such time as a majority vote of the stockholders shall otherwise provide,
that NYBE shall continue as an "S" corporation. The parties hereto acknowledge
and agree that in addition to the restrictions on transfer of NYBE's capital
stock contained or to be contained in NYBE's Certificate of Incorporation, until
such time as the stockholders of NYBE holding a majority of the common stock of
NYBE then issued and outstanding agree otherwise (1) the income and loss of,
NYBE and NYBE's stockholders will be subject to taxation for federal income tax
purposes under the provisions of Subchapter S of the Code, and the stockholders
shall take all and any actions necessary to maintain such S status, (2) the
parties hereto will not take any action or make any transfer by sale, gift,
assignment, pledge, or other disposition or encumbrance of the parties' stock in
NYBE, whether said stock is now owned or hereafter acquired, and whether said
transfer or disposition is voluntary, involuntary, or by operation of law, if
such action will or may result in the termination or revocation of NYBE's S
election, (3) at least 30 days prior to any proposed transfer, disposition, or
encumbrance of NYBE's stock the parties hereto will provide NYBE with a written
statement regarding the identity of the proposed transferee (sufficient to
satisfy NYBE that the transferee will not be an ineligible S corporation
shareholder), and (4) the parties hereto will execute and file any consents and
other instruments that may be deemed necessary or advisable by counsel to NYBE
to keep NYBE's S election in force. In the event of any purported or attempted
transfer of stock that does not comply with the provisions of this Contract and
NYBE's Certificate of Incorporation, then, at NYBE's option (which option shall
be exercised by the mailing of written notice within thirty days of the
purported transfer) the purported transfer shall be null and void and of no
effect, and the transferee shall not be deemed to be a stockholder of NYBE, and
shall not be entitled to receive a new stock certificate or any dividends or
other distributions with respect to NYBE's stock. So long as NYBE's S Election
remains in effect, the parties hereto agree to cause NYBE to distribute to its
stockholders a minimum of 40% of its Net Income, calculated in accordance with
GAAP, as hereinafter defined. "GAAP" shall mean generally accepted accounting
principles, applied on a consistent basis, set forth in Opinions of the
Accounting Principles Board of the American Institute of Certified Public
Accountants or in statements of the Financial Accounting Board, or the
successors of either, which are applicable in the circumstances as of the date
in question; and the requisite that such principles be applied on a consistent
basis means that the accounting principles observed in a current period are
comparable in all material respects to those applied in a preceding period.

- 15 -

<PAGE>

13. LEGAL AND ACCOUNTING ADVISORS. The parties agree that the firm of
Hert & Baker, P.C., Stillwater, Oklahoma, shall continue to serve as general
counsel to NYBE in regard to all legal matters affecting NYBE, unless otherwise
determined by a subsequent majority vote of the Board of Directors. The parties
further agree that MURFIN, INC. shall serve as the accounting firm for NYBE
until and unless a majority vote of the Board of Directors shall determine
otherwise.

14. NON-COMPETITION AGREEMENT. Each of the parties agree that they shall
not, directly or indirectly, enter into a similar business at any time while
they remain the holder of any shares of stock in NYBE, or for a period of five
years after they cease to be a holder of any shares of Stock in NYBE. Each of
the parties recognizes the fiduciary duties they owe to their fellow
stockholders. Each of the parties agree that none of the information obtained
as a result of the purchase of said Stock, relating to the business affairs,
operation and trade secrets of NYBE and any related companies, or other
companies or corporations owned by Sellers Group shall be disclosed to any third
parties at any time, including after such persons cease to be stockholders of
NYBE. The parties acknowledge and agree that the provisions set forth above in
this Section 14 shall not be applied so as to prohibit Sellers Group's ownership
and operation of Sellers' Stores or Sellers Group's future stores within the
State of Oklahoma and/or Sedgwick County, Kansas.

15. NOTICE. All notices, requests, demand and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally or mailed by certified or
registered mail, postage prepaid, to the addresses as set forth for each member
of Sellers Group and Buyers Group, set forth below:

Robert Geresi 2011 Iba Drive, Stillwater, OK 74074
Paul Sorrentino 2002 W. 3rd Ave., Stillwater, OK 74074
Vince Vrana 12404 Blue Sage Road, Oklahoma City, OK 73120
Dave Murfin 250 North Water, Suite 300, Wichita, KS 67202
Paul Hoover P.O. Box 781507, Wichita, KS 67278

16. VALIDITY. In the event that any one or more of the provisions of this
Contract are determined to be invalid or otherwise unenforceable, such
determination shall not, in any manner, invalidate nor affect any other
provision or term hereof, and this Contract shall be construed, interpreted and
enforced in all other respects as though such invalid or unenforceable
provisions were omitted.

- 16 -

<PAGE>

17. ASSIGNABILITY; BINDING EFFECTS. Except as otherwise expressly provided
herein, this Contract may not be assigned by any party without the prior written
consent of all of the other parties hereto. This Contract shall inure to the
benefit of and be binding upon each of the parties hereto and their respective
successors and permitted assigns.

18. SURVIVAL. The terms, conditions, covenants, and provisions contained
herein shall survive the closing of this Contract.

19. ENTIRE AGREEMENT. This Contract constitutes the entire agreement
among the parties pertaining to the subject matter hereof, and supersedes all
prior and contemporaneous agreements and understandings of the parties in
connection therewith.

20. APPLICABLE LAW. This Contract and the rights of all parties hereunder
shall be construed in accordance with the laws of the State of Oklahoma.

21. Majority Vote; SUPERMAJORITY. Except as otherwise provided below in
this Section 21, any time a majority vote is required in connection with
corporate action to be taken by the Board of Directors or stockholders of NYBE,
a "majority" of such body shall mean a majority of those directors or
stockholders present, in person or proxy, at such meeting; PROVIDED, HOWEVER,
that the affirmative vote of five members of the Board of Directors of NYBE (or
at least 75% of the members of the Board of Directors if the number of directors
constituting the entire Board does not equal six) shall be required to authorize
any of the following:

a. The election or removal of any officer of NYBE;

b. The sale, exchange, lease, mortgage, pledge, or other transfer,
in a single transaction or series of related transactions, of all or
substantially all of the assets or business of NYBE;

c. The approval of franchisees and the approval of the terms and
provisions of franchise and/or development agreements;

d. The incurring of obligations for borrowed money in excess of an
aggregate principal amount then outstanding of $5,000.00.

e. The election or termination by NYBE to be taxed as an "S"
corporation for federal income tax purposes.

- 17 -

<PAGE>

f. The merging of NYBE with or into any other corporation or other
entity or the dissolution of NYBE;

g. The issuance of any additional shares of stock of NYBE; or

h. A material change in the nature of the business of NYBE.

If at anytime more than twenty percent (20%) of the then issued and outstanding
shares of stock of NYBE are held by a person or persons not a member of either
the Sellers Group or Buyers Group, all the provisions of this Section 21 shall
become null and void and of no further force and effect.

22. COUNTERPARTS. This Contract may be executed in two or more
counterparts, each of which shall be deemed an original Contract, and all of
which shall constitute one Contract to be effective as of the same date hereof.

23. STOCK CERTIFICATE LEGEND. Upon the closing of this Contract, all
stock certificates representing shares of stock owned of record by all parties
hereto shall bear the following conspicuous legend:

THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED AS TO
TRANSFER BY THE TERMS, CONDITIONS, AND COVENANTS OF A CONTRACT WITH RESPECT
THERETO DATED THE DAY OF JUNE, 1994, A COPY OF WHICH IS ON FILE WITH
NEW YORK BAGEL ENTERPRISES, INC. ("NYBE"). NYBE WILL FURNISH A COPY OF
SAID CONTRACT TO ANY PARTY HAVING A VALID INTEREST THEREIN. ANY TRANSFER
OF STOCK OTHER THAN IN ACCORDANCE WITH SAID CONTRACT SHALL BE ABSOLUTELY
NULL AND VOID.

THE SECURITIES REPRESENTED BY THIS STOCK CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE SOLD, PLEDGED,
HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED, WHETHER OR NOT FOR
CONSIDERATION, BY THE HOLDER EXCEPT UPON THE ISSUANCE OF NYBE OF A
FAVORABLE OPINION OF ITS COUNSEL AND/OR SUBMISSION TO NYBE OF SUCH OTHER
EVIDENCE AS MAY BE SATISFACTORY TO COUNSEL FOR THE CORPORATION, TO THE
EFFECT THAT ANY SUCH

- 18 -

<PAGE>

TRANSFER SHALL NOT BE IN VIOLATION OF THE ACT AND THE STATE ACTS.

IN WITNESS WHEREOF, the parties hereto have executed this Contract the year
and date first above written.

SELLER GROUP

/s/ Robert Geresi
------------------------------------
Robert Geresi

/s/ Paul Sorrentino
------------------------------------
Paul Sorrentino

/s/ Vince Vrana
------------------------------------
Vince Vrana

BUYERS GROUP:

/s/ David L. Murfin
------------------------------------
David L. Murfin

/s/ Paul R. Hoover
------------------------------------
Paul R. Hoover

- 19 -

<PAGE>

Exhibit List

Exhibit 2.e Charter Documents
Exhibit 2.m Intangible Property
Exhibit 3.b Sellers' Stores

- 20 -

<PAGE>

EXHIBIT 3.B

New York Bagel Shop, Inc

521 W. Elm 115 E. 8th
Stillwater, OK 74074 Stillwater OK 74074

VPR, Inc.

Casady Square Leadership Square
9325 N. Penn 211 N. Robinson
Oklahoma City, OK 73120 Oklahoma City, OK 73102

Brixton Square 1700 S. Broadway
7101 NW Expressway, Suite 235 Edmond, OK 73013
Oklahoma City, OK 73132

Bagel Boss, Inc.

7125 S. Yale Ave 1520 E. 15th-Cherry St
Tulsa, OK 74137 Tulsa, OK 74137

New York Bagel and Delicatessen, Inc.

4618 E. Central 126 E. Douglas
Wichita, Kansas 67208 Wichita, Kansas 67202

Bagels of Norman, Inc.

301 W. Boyd 1150 W. Lindsey Street
Norman, OK 73069 Norman, OK 73072

<PAGE>

Exhibit C
To Licensing Agreement
between NYBE and New York Bagel Shop, Inc.

SHAREHOLDERS

Robert J. Geresi
Paul T. Sorrentino
John Geresi

<PAGE>

Exhibit C
To Licensing Agreement
between NYBE and VPR Incorporated

SHAREHOLDERS

Robert J. Geresi
Paul T. Sorrentino
Vincent Vrana

<PAGE>

Exhibit C
To Licensing Agreement
between NYBE and Bagel Boss, Inc.

SHAREHOLDERS

Robert J. Geresi
Paul T. Sorrentino
Vincent Vrana
Joseph Trizza

<PAGE>

Exhibit C
To Licensing Agreement
between NYBE and New York Bagel Shop & Delicatessen, Inc.

SHAREHOLDERS

Robert J. Geresi
Paul T. Sorrentino
Vincent Vrana
Chad Watkins

<PAGE>

Exhibit C
To Licensing Agreement
between NYBE and Bagels of Norman, Inc.

SHAREHOLDERS

Robert J. Geresi
Paul T. Sorrentino
Vincent Vrana
Brent Durham

<PAGE>

-----------------
DATE OF AGREEMENT
LOAN AGREEMENT DECEMBER 26, 1995
- --------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- --------------------------------------------------------------------------------
STILLWATER NATIONAL BANK
New York Bagel Enterprises, Inc. AND TRUST COMPANY
P.O. Box 1267 P.O. Box 1988 - 608 S. Main
Stillwater, OK 74076 Stillwater, OK 74074
- --------------------------------------------------------------------------------
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #28964 dated 12/26/95 in the amount of 500,000.00 with a maturity of
03/26/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements beginning 12/31/95
Annual Audited Financial Statement and Tax Return, beginning 12/31/95
(to receive by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

B. LITIGATION. To inform Lender promptly of any litigation, or of any
claim or controversy which might become the subject of litigation,
against Borrower or affecting any of Borrower's property, if such
litigation or potential litigation, in the event of an unfavorable
outcome, would have a material adverse effect on Borrower's financial
condition;

C. TAXES. To pay promptly when due any and all taxes, assessments and
governmental charges against Borrower or against any of Borrower's
property, unless the same is being contested in good faith by
appropriate proceedings and reserves deemed adequate by Lender have
been established therefor;

D. LABOR AND MATERIAL. To pay promptly all lawful claims whether for
labor, materials or otherwise, which might or could, if unpaid, become
a lien or charge on any property or assets of Borrower, unless and to
the extent only that the same are being contested in good faith by
appropriate proceedings and reserves deemed adequate by Lender have
been established therefor;

E. INSURANCE. To maintain with financially sound and reputable insurance
organizations approved by Lender, insurance of the kinds and covering
the risks and in the amounts usually carried by companies engaged in
businesses similar to that of Borrower, which insurance in all events
shall be satisfactory to Lender and provide suitable loss payable
clauses in favor of Lender, and, at Lender's request deliver to Lender
evidence of the maintenance of such insurance; and

F. ACCOUNTING RECORDS. To maintain adequate records in accordance with
generally accepted accounting principles of all transactions so that
at any time and from time to time the true and complete financial
condition of the Borrower may be readily determined.

Note: As Lease is not assignable, Borrowers agree to keep all Lease
payment

By: /s/ Paul Hoover
--------------------------------
Paul Hoover, Vice President

By: /s/ Robert D. Young
--------------------------------
Robert D. Young,
Secretary/Treasurer

By: /s/ Ruth E. Walker Sr. VP
- -------------------------------------------- -----------------------------------
Ruth E. Walker
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

-------------------------
DATE OF AGREEMENT
- --------------------------------------------------------------------------------
LOAN AGREEMENT
- --------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- --------------------------------------------------------------------------------
STILLWATER NATIONAL BANK
New York Bagel Enterprises, Inc. AND TRUST COMPANY
P.O. Box 1267 P.O. Box 1988 - 608 S. Main
Stillwater, OK 74076 Stillwater, OK 74074
- --------------------------------------------------------------------------------
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #28967 dated 12/29/95 in the amount of 2,750,000.00 with a maturity of
12/28/00.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly Financial Statements and Accounts Receivable Listings beg
12/31/95 (allow 45 days to receive)
Annual Audited Financial Statement and Tax Return, beginning 12/31/95
(to receive by 4/15/96)
Annual Projected Balance Sheet and Income Statement
Annual Statement of Cash Flows
Annual Personal Financial Statements and Tax Returns from Guarantors.

Corporate Stock is not being formally assigned to Bank; however
Borrower agrees not to pledge or otherwise encumber stock without
prior written consent of Bank.

By: /s/ Paul Hoover
--------------------------------
Paul Hoover, Vice President

By: /s/ Ruth E. Walker By: /s/ Robert D. Young
- -------------------------------------------- -----------------------------------
Ruth E. Walker, Sr. VP Robert D. Young,
Secretary/Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

-------------------------
DATE OF AGREEMENT
LOAN AGREEMENT MARCH 15, 1996
- --------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- --------------------------------------------------------------------------------
STILLWATER NATIONAL BANK
New York Bagel Enterprises, Inc. AND TRUST COMPANY
250 N. Water, Suite 300 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- --------------------------------------------------------------------------------
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #28989 dated 03/15/96 in the amount of 136,800.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and Income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

D. LABOR AND MATERIAL. To pay promptly all lawful claims whether for
labor, materials or otherwise, which might or could, if unpaid, become
a lien or charge on any property or assets of Borrower, unless and to
the extent only that the same are being contested In good faith by
appropriate proceedings and reserves deemed adequate by Lender have
been established therefor;

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LENDER NAME AND ADDRESS BORROWER(S) SIGNATURE(S)
- --------------------------------------------------------------------------------
CONFIRMED New York Bagel Enterprises, Inc.
STILLWATER NATIONAL BANK
AND TRUST COMPANY By: /s/ Robert Geresi
P.O. Box 1988 - 608 S. Main -------------------------------------
Stillwater, OK 74074 Robert Geresi, President
By: /s/ Paul Hoover
-------------------------------------
Paul Hoover, Vice President
By: /s/ Ruth E. Walker By: /s/ Robert D. Young
- --------------------------------------- ----------------------------------------
Ruth E. Walker, Sr. VP Robert D. Young,
Secretary/Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

-------------------------
DATE OF AGREEMENT
LOAN AGREEMENT MARCH 15, 1996
- --------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- --------------------------------------------------------------------------------
STILLWATER NATIONAL BANK
New York Bagel Enterprises, Inc. AND TRUST COMPANY
250 N. Water, Suite 2000 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- --------------------------------------------------------------------------------
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #28987 dated 03/15/96 in the amount of 136,800.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

C. TAXES. To pay promptly when due any and all taxes, assessments and
governmental charges against Borrower or agaInst any of Borrower's
property, unless the same is being contested in good faith by
appropriate proceedings and reserves deemed adequate by Lender have
been established therefor;

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LENDER NAME AND ADDRESS BORROWER(S) SIGNATURE(S)
- --------------------------------------------------------------------------------
CONFIRMED New York Bagel Enterprises, Inc.
STILLWATER NATIONAL BANK
AND TRUST COMPANY By: /s/ Robert Geresi
P.O. Box 1988 - 608 S. Main -------------------------------------
Stillwater, OK 74074 Robert Geresi, President
By: /s/ Paul Hoover
-------------------------------------
Paul Hoover, Vice President
By: /s/ Ruth E. Walker By: /s/ Robert D. Young
------------------------------------ ----------------------------------------
Ruth E. Walker, Sr. VP Robert D. Young,
Secretary/Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

Loan #28988 dated 03/15/96 in the amount of 136,800.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LENDER NAME AND ADDRESS BORROWER(S) SIGNATURE(S)
- --------------------------------------------------------------------------------
CONFIRMED New York Bagel Enterprises, Inc.
STILLWATER NATIONAL BANK
AND TRUST COMPANY By: /s/ Robert Geresi
P.O. Box 1988 - 608 S. Main --------------------------------
Stillwater, OK 74074 Robert Geresi, President
By: /s/ Paul Hoover
-------------------------------
Paul Hoover, Vice President
By: /s/ Ruth E. Walker By: /s/ Robert D. Young
- -------------------------------------------- -----------------------------------
Ruth E. Walker, Sr. VP Robert D. Young,
Secretary/Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CUSTOMER COPY

<PAGE>

-------------------------
DATE OF AGREEMENT
LOAN AGREEMENT MARCH 15, 1996
- --------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
STILLWATER NATIONAL BANK
New York Bagel Enterprises, Inc. AND TRUST COMPANY
250 N. Water, Suite 300 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- --------------------------------------------------------------------------------
The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or some
part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #28990 dated 03/15/96 in the amount of 136,800.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from
Guarantors.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LENDER NAME AND ADDRESS BORROWER(S) SIGNATURE(S)
- --------------------------------------------------------------------------------
CONFIRMED New York Bagel Enterprises, Inc.
STILLWATER NATIONAL BANK
AND TRUST COMPANY By: /s/ Robert Geresi
P.O. Box 1988 - 608 S. Main -------------------------------------
Stillwater, OK 74074 Robert Geresi, President
By: /s/ Paul Hoover
-------------------------------------
Paul Hoover, Vice President
By: /s/ Ruth E. Walker By: /s/ Robert D. Young
- --------------------------------------- ---------------------------------------
Ruth E. Walker, Sr. VP Robert D. Young,
Secretary/Treasurer
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

Loan #28986 dated 03/15/96 in the amount of 101,600.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

<PAGE>

Loan #28991 dated 03/15/96 in the amount of 107,200.00 with a maturity of
06/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or any
part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:
Monthly financial statements & accounts receivable (royalty fees
receivable) beg 1/31/96 (allow 45 days to receive)
Annual Corporate Tax Return, beginning 12/31/95 (by 4/15/96)
Audited Financial Statement beginning 12/31/95 (by 4/15/96)
Annual Statement of Cash Flows and Projected Balance Sheet & Income
Statement (for 1996 to be received by 4/15/96)
Annual Personal Financial Statements and Tax Returns from Guarantors.

- --------------------------------------------------------------------------------
LENDER NAME AND ADDRESS BORROWER(S) SIGNATURE(S)
- --------------------------------------------------------------------------------
CONFIRMED New York Bagel Enterprises, Inc.
STILLWATER NATIONAL BANK
AND TRUST COMPANY By: /s/ Robert Geresi
P.O. Box 1988 - 608 S. Main --------------------------------
Stillwater, OK 74074 Robert Geresi, President
By: /s/ Paul Hoover
--------------------------------
Paul Hoover, Vice President

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

UNIFORM FRANCHISE OFFERING CIRCULAR
FOR PROSPECTIVE FRANCHISEES

Information for Prospective Franchisees Required
by Federal Trade Commission

**********

To protect you, we've required your franchisor to give you this information. WE
HAVEN'T CHECKED IT, AND DON'T KNOW IF IT'S CORRECT. It should help you make up
your mind. Study it carefully. While it includes some information about your
contract, don't rely on it alone to understand your contract. Read all of your
contract carefully. Buying a franchise is a complicated investment. Take your
time to decide. If possible, show your contract and this information to an
advisor, like a lawyer or an accountant. If you find anything you think may be
wrong or anything important that's been left out, you should let us know about
it. It may be against the law.

There may also be laws on franchising in your state. Ask your state agencies
about them.

Federal Trade Commission.

WASHINGTON, D.C. 20580

JUNE 25, 1996

<PAGE>

FRANCHISE OFFERING CIRCULAR

New York Bagel Enterprises, Inc.
A Kansas Corporation
250 N. Water
Wichita, Kansas 67202
(316) 267-7373

The franchisee will operate a delicatessen type restaurant featuring
freshly baked bagels and certain other food products and beverages.

The initial franchise fee to operate a restaurant with a bakery (a "Bakery
Restaurant") is $21,000 and to operate a restaurant without a bakery (a
"Satellite Restaurant") is $12,000. The estimated initial investment for a
Bakery Restaurant ranges from $163,000 to $253,000 and for a Satellite
Restaurant ranges from $85,000 to $144,000. These ranges exclude real estate
costs. The initial development fee will generally be the sum of $7,000 times
the number of Bakery Restaurants and $4,000 times the number of Satellite
Restaurants to be developed. If we grant a franchise under a Development
Agreement, you will pay an additional development fee of $14,000 for each Bakery
Restaurant and $8,000 for each Satellite Restaurant in lieu of the entire
initial franchise fee described above.

Risk Factors:

1. THE FRANCHISE AGREEMENT AND THE DEVELOPMENT AGREEMENT PERMIT THE FRANCHISEE
OR DEVELOPER TO SUE OR ARBITRATE WITH US ONLY IN THE STATE OF KANSAS. OUT
OF STATE LITIGATION OR ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE
SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO SUE OR ARBITRATE
WITH US IN KANSAS THAN IN YOUR HOME STATE.
2. THE FRANCHISE AGREEMENT AND THE DEVELOPMENT AGREEMENT STATE THAT KANSAS LAW
GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS
AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available at your public library.
If you learn that anything in the Offering Circular is untrue, contact
the Federal Trade Commission.

Effective Date: June 25, 1996
<PAGE>

TABLE OF CONTENTS

ITEM HEADING PAGE

1 The Franchisor, its Predecessors and Affiliates. . . . . . . . . . . 1

2 Business Experience. . . . . . . . . . . . . . . . . . . . . . . . . 3

3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

4 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5 Initial Franchise Fee. . . . . . . . . . . . . . . . . . . . . . . . 6

6 Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

7 Initial Investment . . . . . . . . . . . . . . . . . . . . . . . . .10

8 Restrictions on Sources of Products and Services . . . . . . . . . .13

9 Franchisee's Obligations . . . . . . . . . . . . . . . . . . . . . .15

10 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

11 Franchisor's Obligations . . . . . . . . . . . . . . . . . . . . . .17

12 Territory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27

13 Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29

14 Patents, Copyrights and Proprietary Information. . . . . . . . . . .32

15 Obligation to Participate in the Actual Operation of the Franchise
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

16 Restrictions on What the Franchisee May Sell . . . . . . . . . . . .34

17 Renewal, Termination, Transfer and Dispute Resolution. . . . . . . .34

18 Public Figures . . . . . . . . . . . . . . . . . . . . . . . . . . .41

-i-

<PAGE>

19 Earnings Claims. . . . . . . . . . . . . . . . . . . . . . . . . . .41

20 List of Outlets. . . . . . . . . . . . . . . . . . . . . . . . . . .42

21 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .49

22 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50

23 Receipt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51

EXHIBITS

A. Development Agreement

B. Franchise Agreement

C. Guaranty (of Franchise Agreement)

D. Guaranty (of Development Agreement)

E. Covenant Agreement

F. Confidentiality Agreement

G. Addendum to Lease Agreement

H. Financial Statements

-ii-

<PAGE>

ITEM 1

THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

To simplify the language in this Offering Circular "we", "us", and "NYBE"
mean New York Bagel Enterprises, Inc., the franchisor, but do not include the
corporation's officers, directors, or shareholders. "You" means the person that
buys the franchise, and if you are a corporation, partnership, or limited
liability company, certain provisions of the Franchise Agreement and the
Development Agreement will include your owners. NYBE is a Kansas corporation
which was incorporated on December 27, 1995. NYBE is the successor by merger to
New York Bagel Enterprises, Inc., an Oklahoma corporation which was
incorporated on May 24, 1990 ("NYBE-Oklahoma"). NYBE does not currently do
business under another name. NYBE's (and NYBE-Oklahoma's) principal business
address is 250 N. Water, Wichita, Kansas 67202.

We franchise the right to operate a quick service bakery and delicatessen
type restaurant featuring freshly made bagels and deli-style sandwiches, under
the name "NEW YORK BAGEL CAFE & DELI." These restaurants operate under a unique
system developed by us for the efficient management and operation of clean,
attractive, and distinctive restaurants and for the production and sale of high
quality food products at these restaurants under a uniform method of operation.
Our system includes special recipes and menu items; distinctive design, decor,
color scheme, and furnishings; standards, specifications, and procedures for
operations; procedures for quality control; training and assistance; and
advertising and promotional programs (the "System"). The System is identified
by means of certain trade names, service marks, and trademarks, including the
marks "NEW YORK BAGEL CAFE & DELI" and "NYB", and any other trade names, service
marks, and trademarks as we may designate for System identification (the
"Marks").

We offer a development agreement (the "Development Agreement") in the form
attached as Exhibit A. The Development Agreement grants the right and
obligation to establish and operate a certain number of New York Bagel Shop and
Delicatessen restaurants (collectively, the "Restaurants"; individually, a
"Restaurant") in a specified area (the "Assigned Area") at specific locations to
be designated in separate franchise agreements. You will establish each
Restaurant under the development schedule in the Development Agreement. The
Development Agreement provides exclusivity and a right of first refusal to you
for additional Restaurants within the Assigned Area. As a condition to
exercising the development right for each Restaurant, you must secure a location
approved by us. After we approve the location for the Restaurant, you must sign
a franchise agreement (the "Franchise Agreement") in the form attached as
Exhibit B for each right to develop a Restaurant exercised under the Development
Agreement. The Franchise Agreement governs the construction and operation of
the Restaurant at the approved location and provides an area of exclusivity
within a radius of the approved location (the "Assigned

-1-

<PAGE>

Territory"). In certain areas, we may offer individual Franchise Agreements for
the establishment and operation of one Restaurant at a specified location. You
will pay separate fees for the Development Agreement and the Franchise
Agreement. The franchise offered is for the establishment and operation of a
Restaurant under the Franchise Agreement.

Typically, franchisees open a Bakery Restaurant first. Later, franchisees
may operate Satellite Restaurants located within a short distance from the
Bakery Restaurant under separate Franchise Agreements for each Satellite
Restaurant entered into under the Development Agreement. The initial franchise
fee and the total initial investment for a Satellite Restaurant is significantly
lower than that of a Bakery Restaurant. A Satellite Restaurant sells bagels and
bakery items prepared at a Bakery Restaurant and does not have the substantial
investment in ovens and other equipment. We are not obligated to grant a
franchise for a Satellite Restaurant, except under the terms of the Development
Agreement.

Customers of NEW YORK BAGEL CAFE & DELI Restaurants are typically consumers
in need of quick service meals for breakfast or lunch. Competitors include
major fast food chains who serve both breakfast and lunch, doughnut shops,
delicatessens, and sandwich shops.

There are no regulations specific to the quick food service industry,
although you must comply with all local, state, and federal health and
sanitation laws in the operation of your Restaurant. Other laws may be
applicable to your business and we urge you to make inquiries about these laws.

The first NEW YORK BAGEL CAFE & DELI was opened in Stillwater, Oklahoma in
1986 by New York Bagel Shop, Inc., an Oklahoma corporation. In 1990,
NYBE-Oklahoma was formed to begin franchising NEW YORK BAGEL CAFE & DELI
restaurants and it acquired the rights to trade names, service marks, and trade
secrets from New York Bagel Shop, Inc. NYBE-Oklahoma began offering franchises
for Restaurants in January, 1993. NYBE-Oklahoma was merged into NYBE on
December 28, 1995. We are not involved in any business activities other than
the sale of NEW YORK BAGEL CAFE & DELI franchises. New York Bagel Shop, Inc.,
has not offered franchises for restaurants or any other type of business, nor
has NYBE nor NYBE-Oklahoma offered franchises for any other type of business.

-2-

<PAGE>

ITEM 2

BUSINESS EXPERIENCE

PRESIDENT AND CHIEF EXECUTIVE
OFFICER/DIRECTOR: ROBERT J. GERESI

Mr. Geresi was employed as either president or vice-president of New York
Bagel Shop, Inc. (1985), New York Bagel Shop & Delicatessen, Inc. (1992), VPR,
Incorporated (1988), Bagel Boss, Inc. (1990), and Bagels of Norman, Inc. (1994)
from the bracketed dates. Each of these corporations was based in Stillwater,
Oklahoma, except for New York Bagel Shop & Delicatessen, Inc., which was based
in Wichita, Kansas. Each of these corporations merged into NYBE-Oklahoma on
December 28, 1995. Mr. Geresi's chief duties for each of these corporations
included financial management, quality control, and inventory management. Mr.
Geresi was also a director of and employed by NYBE-Oklahoma since May 24, 1990,
where his duties included financial management, franchise marketing, training,
and service. Mr. Geresi's duties at NYBE include financial management,
franchise marketing, training, and service.

VICE PRESIDENT/DIRECTOR: PAUL T. SORRENTINO

Since 1986, Mr. Sorrentino has been employed as either president or
vice-president of New York Bagel Shop, Inc. (1985), New York Bagel Shop &
Delicatessen, Inc. (1992), VPR, Incorporated (1988), Bagel Boss, Inc. (1990),
and Bagels of Norman, Inc. (1994) from the bracketed dates. Each of these
corporations was based in Stillwater, Oklahoma, except for New York Bagel Shop &
Delicatessen, Inc., which was based in Wichita, Kansas. Each of these
corporations merged into NYBE-Oklahoma on December 28, 1995. Mr. Sorrentino's
chief duties for each of these corporations included marketing, lease
negotiations, and expansion plans. Mr. Sorrentino was also a director of and
was employed by NYBE-Oklahoma since May 24, 1990, where his duties included
franchise marketing, training, and service. Mr. Sorrentino's duties at NYBE
include franchise marketing, training, and service.

VICE PRESIDENT/DIRECTOR: VINCENT VRANA

In 1986, Mr. Vrana was employed as the manager of the first New York Bagel
Shop & Delicatessen in Stillwater, Oklahoma, which was and is owned by New York
Bagel Shop, Inc. (1985). Mr. Vrana's duties included supervision of employees,
inventory management, and bookkeeping. Since 1988, Mr. Vrana has been employed
as president or vice-president of VPR, Incorporated (1988), Bagel Boss, Inc.
(1990), New York Bagel Shop & Delicatessen, Inc. (1992), and Bagels of Norman,
Inc. (1994) from the bracketed dates. Each of these corporations was

-3-

<PAGE>

based in Stillwater, Oklahoma, except for New York Bagel Shop & Delicatessen,
Inc., which was based in Wichita, Kansas. Each of these corporations merged
into NYBE-Oklahoma on December 28, 1995. Mr. Vrana's chief duties for each of
these corporations included purchasing, baking production, and employee
relations. Mr. Vrana was a director of and was employed by NYBE-Oklahoma since
May 24, 1990, where his chief duty was operations management. Mr. Vrana's chief
duty at NYBE is operations management.

VICE PRESIDENT/DIRECTOR: PAUL R. HOOVER

Mr. Hoover purchased a franchise to operate a New York Bagel & Delicatessen
satellite restaurant in March of 1994. Mr. Hoover joined NYBE-Oklahoma and NYBE
as a Director and Vice President effective as of July 1, 1994. His principal
duties at NYBE-Oklahoma and NYBE include franchise marketing and administration.
Since 1984, Mr. Hoover has been a director and stockholder of West-Kan Foods,
Inc., a Wendy's franchisee. Since 1990, Mr. Hoover has also been the owner of
Paul R. Hoover Real Estate Company.

DIRECTOR: DAVID L. MURFIN

Mr. Murfin joined NYBE-Oklahoma as a Director effective as of July 1, 1994.
Since January, 1990, Mr. Murfin has been president of Murfin Drilling Company,
Wichita, Kansas.

SECRETARY-TREASURER/DIRECTOR: ROBERT D. YOUNG

Mr. Young joined NYBE-Oklahoma as a Director and Secretary-Treasurer
effective as of July 1, 1994, and serves as NYBE's chief financial and
accounting officer. His principal duties at NYBE-Oklahoma and NYBE include
financial planning and the preparation of financial statements. Since July,
1991, Mr. Young has been president of Murfin, Inc., Wichita, Kansas. Since
November, 1974, Mr. Young has also been chief financial officer of Murfin
Drilling Company, Wichita, Kansas.

DIRECTOR OF FRANCHISE OPERATIONS: MARKUS K. SCHOLLER

Mr. Scholler joined NYBE-Oklahoma in October, 1994. His principal duties
include providing operational support, training, and development for
franchisees. From November 5, 1990 to October 2, 1994, Mr. Scholler was
training general manager for J.S. Ventures, Inc., a franchisee of Applebees
Neighborhood Grill & Bar, Wichita, Kansas. From September, 1986 to September,
1990, Mr. Scholler was manager/managing partner of Midco Foods, Inc., a
franchisee of T.J. Cinnamons Bakery, Wichita, Kansas.

-4-

<PAGE>

DIRECTOR OF MARKETING AND PUBLIC RELATIONS: SCOTT WHITE

Mr. White joined NYBE-Oklahoma in March, 1994. His principal duties
include marketing and public relations. From August, 1992 to March, 1994, Mr.
White worked as a public relations representative for Stillwater National Bank,
Stillwater, Oklahoma. From May, 1991 to August, 1992, Mr. White worked as a
public relations representative for Liberty Bank, Tulsa, Oklahoma.

ITEM 3

LITIGATION

MICHAEL VARENHORST AND DEBORAH A. VARENHORST V. PAUL R. HOOVER, CHERI M.
HOOVER, MIDWEST PEST CONTROL, WILLIAM P. VEATCH, SR. D/B/A QUALITY BUILDING
INSPECTION SERVICE, BECK ROOFING & CONSTRUCTION, LAWRENCE BECK, J.P. WEIGAND &
SONS, INC., SALLY VOLBRECHT, AND DONNA BEARD D/B/A DONNA BEARD REAL ESTATE (Case
No. 95 C 2540 in the Eighteenth Judicial District, Sedgwick County, Kansas) was
filed on November 22, 1995. The plaintiffs contracted to purchase a house from
Mr. Hoover and his wife in October 1993. Plaintiffs now allege that the
property had termite or carpenter ant damage, a roof problem, a breakdown in
some heating and cooling equipment and related defects. Plaintiffs allege that
(i) Hoovers negligently or intentionally failed to disclose the alleged defects
in the property, (ii) the real estate agent and broker who represented
plaintiffs in the purchase breached their fiduciary duties by negligently or
intentionally failing to discover or disclose the alleged defects, (iii) the
real estate broker who listed the property for Hoovers negligently failed to
disclose or fraudulently concealed the alleged defects, (iv) the pest inspector
hired by plaintiffs negligently or intentionally failed to discover and disclose
insect damage, (v) the building inspector hired by plaintiffs breached his
contract to competently inspect the property and negligently failed to discover
and disclose the alleged defects, and (vi) the roofer misrepresented to
plaintiffs that the roof he had installed on the property during Hoovers'
ownership was "first class" and a "twenty-year roof". Plaintiffs seek to
recover money damages allegedly in excess of $50,000. Hoovers have denied all
material allegations of the plaintiffs' petition and are vigorously defending
the action.

Except for this action, no litigation is required to be disclosed in this
Offering Circular.

-5-

<PAGE>

ITEM 4

BANKRUPTCY

No person previously identified in Items 1 or 2 of this Offering Circular
has been involved as a debtor in proceedings under the U.S. Bankruptcy Code
required to be disclosed in this Item.

ITEM 5

INITIAL FRANCHISE FEE

We offer a Development Agreement to establish more than one Restaurant
under a development schedule. We also offer in certain geographical areas a
Franchise Agreement to establish one Restaurant.

Under the Development Agreement, you must pay us an initial fee of $7,000
per Bakery Restaurant and $4,000 per Satellite Restaurant required to be
developed in the Assigned Area. The number of Restaurants is determined by
agreement between you and us before the Development Agreement is signed. In
addition to establishing the number of Restaurants you must develop in the
Assigned Area, the development schedule in the Development Agreement will also
specify when each of the Restaurants must be constructed and opened. You must
pay the entire amount of the initial development fee in a lump sum to us at the
time the Development Agreement is signed. The development fee is nonrefundable.

You must pay an initial franchise fee of $21,000 for a Bakery Restaurant or
$12,000 for a Satellite Restaurant when you sign a Franchise Agreement for the
Restaurant. You must operate each Restaurant under a separate Franchise
Agreement, and this fee must be paid in a lump sum to us when each Franchise
Agreement is signed. The initial franchise fee is nonrefundable. However, if
you sign a Franchise Agreement under a Development Agreement, you will pay an
additional development fee of $14,000 for a Bakery Restaurant or $8,000 for a
Satellite Restaurant in lieu of the entire initial franchise fee described
above. Consequently, if you are developing a single Restaurant, you will pay a
single initial franchise fee per Restaurant, and if you are signing a
Development Agreement, you will pay an initial development fee of $7,000
multiplied by the number of Bakery Restaurants to be developed and $4,000
multiplied by the number of Satellite Restaurants to be developed when you sign
the Development Agreement, plus an additional development fee of $14,000 per
Bakery Restaurant ($21,000 less $7,000) or $8,000 per Satellite Restaurant
($12,000 less $4,000) when you sign the Franchise Agreement for each Restaurant.

-6-

<PAGE>

ITEM 6

OTHER FEES

Name of Fee(1) Amount Due Date Remarks
- --------------------------------------------------------------------------------

Royalty 4% of Gross Payable Gross Receipts means all gross
Receipts monthly on revenue during each month of
the 15th day every kind or nature related to
of the next the NYBE Restaurant, including
month all restaurant revenue posted
whether it is collected or
remains uncollected, all
charges for other products,
services, and facilities and
vending machine receipts, but
excluding sales taxes or other
taxes collected by you from
customers for transmittal to
appropriate taxing authorities.
See also Item 9.

Marketing and Maximum - 2% Upon We can establish and administer
Advertising of monthly establish- a Marketing and Advertising
Fund(2) Gross Receipts ment of a Fund which would be used to pay
Marketing and for the costs of developing and
Advertising preparing advertising materials
Fund, payable for use within the System. See
monthly on also Items 8, 9, and 11.
the 15th day
of the next
month

Cooperative Maximum - 2% Upon We can designate geographic
Advertising(3) of monthly establish- areas for purposes of
Gross Receipts ment of an establishing local or regional
Advertising advertising cooperatives for
Cooperative, the System. See also Items 8,
payable 9, and 11.
monthly on
the 15th day
of the next
month

Additional Daily Training Upon demand We will provide initial
Training Fee at NYBE's training at no cost to you
standard rate, although you must pay your
which is employees' travel, lodging, and
currently $75 food expenses. You must
per day, plus reimburse us for training
out of pocket replacement personnel and other
expenses. required or optional training
we may provide your employees.
See also Items 9 and 11.

New Product/ Costs of Upon demand We may inspect and test samples
Service inspection and of items you desire to purchase
Testing testing or lease from a source not
previously approved by us in
writing. You or the proposed
source must pay the reasonable
expenses of the testing or
inspection. See also Item 8.

-7-

<PAGE>

Name of Fee(1) Amount Due Date Remarks
- --------------------------------------------------------------------------------

Additional Daily Training Upon demand We will provide initial on-site
Assistance Fee at NYBE's assistance for the opening of
standard rate, your first Restaurant at no
which is cost to you. You must pay a
currently $75 reasonable daily assistance fee
per day, plus and expenses for travel,
out of pocket lodging, and meals for each
expenses. member of NYBE personnel
providing any other assistance
to you. See also Items 9 and
11.

Audit Costs of Upon demand Payable if audit shows an
Expenses audit, under-statement of at least 2%
including of reported Gross Receipts for
travel, any month. Also payable if you
lodging, and fail to file required financial
fees or wages reports. See also Item 9.
of personnel
of NYBE or
third parties
required to
conduct the
audit.

Transfer $2,500 Before Payable when you transfer an
consummation interest in the Franchise
of transfer Agreement or the Development
Agreement or when a controlling
interest in you is transferred
if transfer satisfies other
conditions specified in the
Development Agreement and the
Franchise Agreement. No
transfer fee is payable if you
transfer the interest to us or
to an entity you formed for
convenience of ownership and
not involving a charge of
beneficial ownership if the
transfer satisfies other
conditions specified in the
Franchise Agreement. See also
Item 9.

Public $20,000 As incurred If our costs and expenses
Offering Fee exceed $20,000, you must pay us
an additional amount to fully
reimburse us for our reasonable
costs and expenses associated
with reviewing the proposed
offering, including legal and
accounting fees. See also Item
9.

Renewal Fee Amount equal Upon signing The renewal fee for a Bakery
to one-half of of new Restaurant is $10,500 and for a
initial Franchise Satellite Restaurant is $6,000.
franchise fee Agreement See also Item 9.
before
expiration of
initial term
of Franchise
Agreement.

Interest 1.5% per month Upon demand Payable on overdue amounts owed
or as allowed to us. Interest begins from the
by law date of the underpayment. See
also Item 9.

-8-

<PAGE>

1
Name of Fee Amount Due Date Remarks
- --------------------------------------------------------------------------------

Costs and Will vary As incurred Payable if incurred by us in
Attorneys under the obtaining injunctive or other
Fees circumstances relief for the enforcement of
any term in the Development
Agreement or Franchise
Agreement. See also Item 9.

Indemnifica Will vary As incurred You must reimburse us for
tion under the claims arising from your
circumstances Restaurant's operations or any
occurrence at your Restaurant.
See also Item 9.

Termination Will vary Upon Amount due equals the sum of
Fee(4) under the termination all franchise fees, royalty
circumstances of the fees, and marketing and
Franchise advertising fees for the 18
Agreement calendar months of operation at
when we the Restaurant preceding your
terminate default. See also Item 9.
after your
default

NOTES:

1 Except for Cooperative Advertising, all fees and charges are imposed by
and are payable to us. All fees are nonrefundable. At our option, you must
give us authorization to debit your bank operating account for the amount due.

2 We have not yet established a Marketing and Advertising Fund. You must
spend a minimum of 4% of Gross Receipts per year for media advertising and
promotional materials. We consider your contributions to a Marketing and
Advertising Fund a portion of the minimum required advertising expenditure.

3 We and our affiliates will participate in any cooperative established for
geographic regions that include Restaurants owned by us or our affiliates. No
advertising cooperatives have yet been established. Whether our or our
affiliates' Restaurants will have controlling voting power in any advertising
cooperative will depend on the geographic region included in the cooperative.
We own 15 Restaurants in Kansas, Oklahoma, and Tennessee. You must spend a
minimum of 4% of Gross Receipts per year for media advertising and promotional
materials. We consider your contributions to local or regional advertising
cooperatives a portion of the minimum required advertising expenditure.

4 If your Restaurant has been in operation for less than 18 months, the
termination fee will be based on the period your Restaurant has been in
operation and projected on an 18 calendar month basis.
-9-

<PAGE>
ITEM 7

INITIAL INVESTMENT

YOUR ESTIMATED INITIAL INVESTMENT

Amount
------------------------
Bakery Satellite Whether To Whom Payment
Description Restaurant Restaurant Method of Payment When Due Refundable is to be Made
- ------------------------------------------------------------------------------------------------------------------------------------

Initial Franchise Fee (1) $21,000 $12,000 Lump sum with portion On signing Franchise No NYBE
paid in advance under Agreement or, partially
Development Agreement, on signing Development
if applicable Agreement.

Site Evaluation Expenses $1,000 to $1,000 to As incurred Before opening No Airlines, hotels,
$2,500 $2,500 restaurants

Travel and Living $2,500 to $500 to As incurred During training No Airlines, hotels,
Expenses While Training $5,000 $2,500 restaurants

Leasehold
Improvements (2) $25,000 to $15,000 to Lump sum Before opening No Vendors
$85,000 $50,000

Real Estate (2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2) (Note 2)

Equipment and $85,000 to $35,000 to Lump sum Before opening No Vendors
Furniture (3) $110,000 $65,000

Signs $2,000 to $2,000 to Lump sum Before opening No Vendors
$5,000 $5,000

Miscellaneous Opening $10,000 $10,000 As incurred As incurred No Suppliers, utilities,
Costs (4) etc.

-10-

<PAGE>

Opening Inventory (5) $3,000 $2,000 Lump sum Before opening No Vendors

Advertising - $2,500 to $2,500 to As incurred As incurred No Radio stations,
3 months (6) $5,000 $5,000 newspapers

Additional Funds - $40,000 $20,000 As incurred As incurred No Employees,
3 months (7) suppliers, utilities
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------

TOTAL ESTIMATED $192,000 to $103,500 to
INITIAL INVESTMENT $286,500 (8) $174,000 (8) (THESE TOTALS DO NOT INCLUDE REAL ESTATE COSTS)

</TABLE>

<PAGE>

NOTES:

1 FRANCHISE FEE/DEVELOPMENT FEE. If we grant the franchise under a
Development Agreement, you must pay a development fee equal to one-third of the
initial franchise fee upon your signing the Development Agreement. We do not
finance any portion of the fee.

2 REAL ESTATE AND IMPROVEMENTS. Your land acquisition costs will vary
depending upon a multitude of factors including whether the property is
purchased or leased, the size and location of the property, and the availability
of financing on commercially reasonable terms. The typical Bakery Restaurant
has 2,200 to 3,000 square feet. The typical Satellite Restaurant has 1,500 to
2,500 square feet. The Restaurant location will most likely be one accessible
to vehicular traffic. In addition, site improvement costs may vary based upon
soil and environmental conditions, availability of utilities to the site, the
topography of the site, the size of the parcel, local zoning, and other building
requirements. If you elect to purchase the site, we anticipate that the range
of cost of the property plus the site improvements would be between $200,000 and
$600,000 depending upon location and whether the Restaurant is a Bakery
Restaurant or a Satellite Restaurant. Acquisition costs may exceed this range
in certain cases or localities. Most franchisees lease retail space for their
Restaurant in strip shopping centers, malls, or in downtown areas. Rent varies
widely from location to location, but we estimate the rent to range from $25,000
to $60,000 per year depending upon the size, condition, and location of the
leased premises. A one month security deposit is also generally required. The
cost of remodeling the leased premises to meet our design specifications for
leasehold improvements depends upon the condition and configuration of the
existing retail space.

3 EQUIPMENT AND FURNITURE. The dining area of the typical Restaurant has a
seating capacity for approximately 40 to 70 persons. Cost of furniture will
vary based upon seating capacity. Equipment cost includes all equipment
necessary to operate the Restaurant including standard fixtures and equipment
(including ovens, mixers, and other baking equipment

-11-

<PAGE>

if a Bakery Restaurant), refrigerators, serving line equipment, cash registers,
point of sale computer systems, decor, and furniture (including retail equipment
like beverage dispensers, coffee makers, cup dispensers, product display cases,
etc.).

4 MISCELLANEOUS OPENING COSTS. Includes security deposits for items other
than real estate, utility costs, business permits, and prepaid expenses.

5 OPENING INVENTORY. This amount represents the cost of baking ingredients
(if a Bakery Restaurant), baked goods, deli-style meats and cheeses, chips,
beverages, other assorted food products, and paper products necessary to operate
for approximately one week.

6 ADVERTISING. You must conduct a grand opening advertising and promotional
program for the Restaurant during the period commencing 7 days before and ending
90 days after its opening and to expend at least $2,500. You will be able to
utilize the marketing and public relations and media materials we have developed
or approved. The cost of initial grand opening advertising is between $2,500
and $5,000 and depends greatly upon the market, media buying power, and the
number of Restaurants in the existing market. This amount includes the
estimated cost of newspaper and radio advertising, circulars, and coupons for
the grand opening and the first three months of business. It does not include
the Marketing and Advertising Fund contribution of up to 2% of your monthly
Gross Receipts which you must pay at our discretion, or contributions to any
applicable advertising cooperatives of up to 2% of your monthly Gross Receipts.

7 ADDITIONAL FUNDS. This amount represents an estimate of the funds needed
to cover pre-opening expenses, initial employee wages, utility deposits,
insurance premiums, licenses, permit costs, uniforms, recruitment, in-store
training expense, various kitchen small wares, and additional opening capital
for other variable costs (e.g., electricity, telephone, heat, etc.), paper,
cleaning, and other supplies. These figures are estimates and we cannot
guarantee that you will not have additional expenses starting the business.
Your costs will depend on various factors, including: how carefully you follow
our methods and procedures for food preparation and operation; your management
skill, experience, and business acumen; local economic conditions; your
location; the local market for bagels; competition; the prevailing wage rate;
and the sales level reached during the initial period.

8 TOTAL ESTIMATED INITIAL INVESTMENT. This total estimated initial
investment does not include any real estate costs. We relied on our nine years
of experience in the bakery and delicatessen business to compile these
estimates. You should review these figures carefully with a business advisor
before purchasing the franchise. We do not offer direct or indirect financing
to franchisees for any items. The availability and terms of financing will
depend on several factors including the availability of financing generally,
your creditworthiness, your available collateral, and lending policies of
financial institutions. The estimate does not include any finance charge,
interest, or debt service obligation.

-12-

<PAGE>

ITEM 8

RESTRICTIONS ON SOURCES OF
PRODUCTS AND SERVICES

We do not currently offer, for purchase or lease, any goods, services,
supplies, fixtures, equipment, inventory, computer hardware or software, or real
estate to franchisees. You must purchase deli-style meats and cheeses only from
a designated supplier to assure the quality of food products and the health and
safety of customers. You must purchase a particular brand of flour but we do
not require you to make that purchase from a specific supplier. You must
purchase particular types of equipment but we do not require you to purchase a
particular brand or purchase from a designated supplier. You must purchase only
the types and/or brands of other food products, beverages, ingredients,
flavoring, garnishes, cartons, bags, boxes, napkins, containers, and packaging
supplies approved by us. We do not require you to purchase these items from a
designated source.

Mandatory specifications and quality standards are contained in the NYBE
Confidential Operating Manual (the "NYBE Manual") or in policy and procedure
statements otherwise communicated to franchisees in writing. We may modify
these specifications and standards and you must comply with all of our
modifications.

If you would like to sell any food products or beverage or use any
ingredients, flavorings, garnishes, containers, or packaging supplies of a type
not previously approved by us, you must notify us in writing and submit to us
whatever information, specifications, or samples that we request. Within a
reasonable time (our goal is 30 days), we will notify you if the item meets our
specifications and quality standards. You or the proposed supplier must
reimburse us for our reasonable expenses for inspection and testing. We will
also base our decision upon review of the suppliers's business reputation,
delivery performance, credit rating, and liability insurance coverage. For food
products, the quality of the product is of paramount importance to our decision
to approve a product.

All items used in the operation of your Restaurant which require our
approval or which must meet our specifications which you will purchase or lease
from independent third party vendors. The goods, equipment, supplies, and
ingredients which you must purchase from approved suppliers or under our
specifications represent 90% of your total purchases for the establishment of
your Restaurant. Our criteria for supplier approval is generally not available
to our franchisees. You do not receive any material benefits like renewal or
granting of additional franchises based upon your use of designated or approved
sources.

Neither we nor our affiliates derive any revenue, rebates, or other
material consideration as a result of any purchases we require you to make. We,
our affiliates, and you do, however,

- 13 -

<PAGE>

benefit from discounts from certain food product suppliers as a result of our
group purchasing power. These discounts are the same for us, our affiliates,
and our franchisees. At this time, there are no organized purchasing or
distribution cooperatives although local or regional advertising cooperatives
may be formed in the future. Item 11 of this Offering Circular describes
advertising cooperatives in more detail. We have negotiated national chain
account purchase agreements with Kraft Food Service, Coca-Cola, Pepsi, and Frito
Lay, which have agreed to make products available for purchase by franchisees at
national chain account pricing.

All your marketing and promotion in any manner or medium must be factual,
ethical, and in good taste in our judgment and must conform to our specified
standards and requirements. You must submit to us (by mail, return receipt
requested), for our prior written approval (except for prices to be charged),
samples of all advertising or promotional plans and materials that you desire to
use and that have not been prepared or previously approved by us. If you do not
receive written disapproval within 15 days from our receipt of your plans and
materials, we will be deemed to have approved. You may not use any marketing or
promotional materials that we have not prepared or approved. See Item 11 of
this Offering Circular for more information concerning advertising and
promotional requirements.

You must construct or remodel your Restaurant in accordance with our
specifications. You must also purchase or lease and use only the fixtures,
equipment, furniture, and signs as we may specify in the NYBE Manual or
otherwise approve. We must approve in writing any alterations to our
specifications you propose to make before any work is begun on the proposed
alteration.

You must furnish us copies of certain insurance policies required by the
Franchise Agreement and other evidence of insurance coverage and payment of
premiums as we may request.

- 14 -

<PAGE>

ITEM 9

FRANCHISEE'S OBLIGATIONS

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER
AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR
OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.

<S> <C> <C> <C>
Item in Offering
Obligation(1) Section in Agreement Circular
________________________________ _______________________________________ ________________________
a. Site selection and acquisition/ Sections 2.2, 5.1, and 5.2 of Franchise Items 5, 6, 7, and 11
lease Agreement and Sections I and III of
Development Agreement

b. Pre-opening purchases/leases Section 5.5 of Franchise Agreement and Items 7 and 8
Section III of Development Agreement

c. Site development and other pre- Sections 5.2, 5.6, 5.7, and 7.1 of Franchise Items 6, 7, and 11
opening requirements Agreement and Section III of Development
Agreement
d. Initial and ongoing training Sections 5.7 and 7.2 of Franchise Agreement Items 6, 7, 11, and 15

e. Opening Section 5.7 of Franchise Agreement Items 7 and 11

f. Fees Sections 4.1, 4.2, 4.3, 6.5, 9.3, 9.4, 10.3, Items 5, 6, 7, and 11
13.3, 13.7, and 15.11 of Franchise
Agreement and Sections II and VII of
Development Agreement

g. Compliance with standards and Sections 5.5, 7.3, 7.5, 8.1 and 8.3 of Items 8, 11, and 16
policies/ Operating manual Franchise Agreement

h. Trademarks and proprietary Sections 2.6, 11.1, 11.2, 11.3, 11.4, 11.6, Items 13 and 14
information(2) 15.2, and 15.7 of Franchise Agreement;
Section V of Development Agreement;
Sections 1 and 2 of Confidentiality
Agreement; and Section 2 of Covenant
Agreement(3)

i. Restrictions on products/ Sections 7.4, 8.1, and 8.2 of Franchise Item 16
services offered Agreement

j. Warranty and customer service None
requirements

k. Territorial development and Sections III and IV of Development Items 1 and 12
sales quota Agreement

- 15 -

<PAGE>

Item in Offering
Obligation(1) Section in Agreement Circular
________________________________ _______________________________________ ________________________
l. Ongoing product/service Section 8.1 of Franchise Agreement Item 8
purchases

m. Maintenance, appearance, and Section 7.6 of Franchise Agreement Items 8 and 11
remodeling requirements

n. Insurance Sections 12.1, 12.2, and 12.3 of Franchise Items 6, 8, and 11
Agreement

o. Advertising Sections 5.7, 8.6, 9.1, 9.2, 9.3, 9.4, and Items 6, 7, 8, and 11
15.5 of Franchise Agreement

p. Indemnification Section 12.4 of Franchise Agreement and Item 6
Section X of Development Agreement

q. Owner's participation/ Sections 7.2, 11.9, and 16.1 of Franchise Items 11 and 15
management/ staffing Agreement

r. Records/reports Sections 7.7, 10.1, 10.2, and 15.12 of Items 6 and 11
Franchise Agreement

s. Inspections/audits Sections 8.4 and 10.3 of Items 6 and 11
Franchise Agreement

t. Transfer(4) Sections 13.1, 13.2, 13.3, 13.5, 13.6, 13.7, Items 6, 15, and 17
and 13.8 of Franchise Agreement and Section
VII of Development Agreement

u. Renewal Section 3.2 of Franchise Agreement Items 6 and 17

v. Post-termination obligations(2) Sections 11.2, 11.4, 15.1, 15.2, 15.3, 15.4, Items 6, 11, 14, and
15.5, 15.6, 15.7, 15.8, 15.9, 15.10, 15.11, 17
and 15.12 of Franchise Agreement; Section
VI of Development Agreement; and Section 2
of Covenant Agreement(3)

w. Non-competition covenants(2) Sections 11.5, 11.6, 11.7, 11.8, 11.9, and Item 17
11.10 of Franchise Agreement; Section VIII
of Development Agreement; and Section 2 of
Covenant Agreement(3)

x. Dispute resolution(5) Sections 12.5, 19.1, 19.2, 19.3, 21.11, Item 17
and 21.12 of Franchise Agreement and Section
XV of Development Agreement

</TABLE>

NOTES:

1 Your owners must guarantee all of your obligations in the Franchise
Agreement and the Development Agreement.

- 16 -

<PAGE>

2 All of your partners, owners, officers, directors, managers, and members
must honor all of your obligations in Article 11 of the Franchise Agreement.

3 Upon our request, you must have your officers, directors, partners,
members, managers, and owners sign a Covenant Agreement in the form attached to
this Offering Circular as Exhibit E.

4 These obligations are also imposed on your owners.

5 The obligations to engage in mediation and arbitration are also imposed
on your officers, directors, partners, members, managers, and owners.

ITEM 10

FINANCING

NYBE does not offer direct or indirect financing. NYBE does not
guarantee your note, lease, or obligation.

ITEM 11

FRANCHISOR'S OBLIGATIONS

Except as listed below, we need not provide any assistance to you.
Before you open your business, we will:

1. Grant you rights to establish a specific number of Restaurants within an
Assigned Area. (Development Agreement - Section I.A)

2. Loan you a Development Manual containing site selection guidelines,
prototype plans, and specifications (not for construction) for a Bakery
Restaurant and a Satellite Restaurant (Development Agreement - Section
V.A), or provide a set of then-current prototype plans and specifications
(not for construction) for a typical Restaurant. (Franchise Agreement -
Section 6.2) Provide you with site layout plans and specifications which
adapt our prototype plans to your Restaurant site. (Franchise Agreement
- Section 6.3) You may have to have "as-built" plans or blueprints
prepared at your expense depending upon the location and local
ordinances.

3. Provide on-site evaluation of your site if we deem it necessary after we
receive your market feasibility study for the site. (Development
Agreement - Section V.A)

4. Approve or disapprove the site for the Restaurant and determine your
Assigned Territory for the Restaurant. (Development Agreement -

Section III.B and Franchise Agreement -

- 17 -

<PAGE>

Sections 2.2, 2.4, and 5.1) A
discussion of the selection of your site for the Restaurant appears later
in this Item 11 under the caption "SITE SELECTION".

5. Not unreasonably withhold our approval of the lease terms or purchase
contract for the site of the Restaurant. (Development Agreement -
Section III.B and Franchise Agreement - Sections 5.2 and 5.3)

6. Approve your evidence of insurance naming us as an additional insured and
approve your evidence that all necessary permits, licenses, and
certifications for the construction and operation of the Restaurant have
been obtained. (Franchise Agreement - Sections 5.2 and 5.3)

7. Loan you one copy of the NYBE Manual. (Franchise Agreement - Section 6.6)
As of the effective date of this Offering Circular, the NYBE Manual has
104 pages and its table of contents is as follows:

TABLE OF CONTENTS

I. INTRODUCTION PAGE

Use of this Manual . . . . . . . . . . . . . . . . . . . . . . I, 1
Material confidentiality . .. . . . . . . . . . . . . . . . . I, 1
Manual revisions . . . . . . . . . . . . . . . . . . . . . . . I, 1
History of New York Bagel Cafe & Deli . . . . . . . . . . . . I, 2
Your responsibilities as franchisee . . . . . . . . . . . . . I, 3
How New York Bagel is different among our competitors . . . . I, 4
Front-of-House defined . . . . . . . . . . . . . . . . . . . . I, 5
Back-of-House defined .. . . . . . . . . . . . . . . . . . . . I, 5
Executive and Support Staff . . . . . . . . . . . . . . . . . I, 6

II. STANDARDS

Consistency among operations .. . . . . . . . . . . . . . . II, 1
NYB Visitation Report . . . . . . . . . . . . . . . . . . . II, 2
NYB Operations and Progress Inspection Report (NYBOPIR). .. II, 4
Customer Service . . . . . . . . . . . . . . . . . . . . . II, 6

III. SUPPORT (SUMMARY OF CONTENT)

* OPERATIONS. . . . . . . . . . . . . . . . . . . . . . III, 1
* EMPLOYEE POLICIES . . . . . . . . . . . . . . . . . . III, 2
* RECIPES . . . . . . . . . . . . . . . . . . . . . . . III, 3
* ITEM PREP & PRESENTATION . . . . . . . . . . . . . . III, 4
* KITCHEN ADMINISTRATION . . . . . . . . . . . . . . . III, 5

- 18 -

<PAGE>

* NYBOPIR DESCRIPTOR . . . . . . . . . . . . . . . . . III, 6
* FRANCHISE OPENING CHECKLIST . . . . . . . . . . . . . III, 7
* TRAINING GUIDELINES . . . . . . . . . . . . . . . . . III, 8
* QUIZZES / QUIZ KEY . . . . . . . . . . . . . . . . . III, 9
* NYB MARKETING/MERCHANDISING . . . . . . . . . . . . . III, 10
* REAL ESTATE DATA PACKAGE . . . . . . . . . . . . . . .III, 11
* UNIT S.O.P. (Standard Operating Procedures) . . . . . III, 12

IV. OPERATIONS/PERSONNEL FORMS

Employee Forms:

* NYB Application . . . . . . . . . . . . . . . . . . . IV, 1
* Reference check . . . . . . . . . . . . . . . . . . . IV, 2
* Employment Eligibility Verification (I-9). . . . . . . IV, 3
* Employee Status Report w/ W-4 . . . . . . . . . . . . IV, 4
* Orientation checklist . . . . . . . . . . . . . . . . IV, 5
* Uniform agreement . . . . . . . . . . . . . . . . . . IV, 6
* Schedule of Availability / Request . . . . . . . . . . IV, 7
* File Maintenance Sheet . . . . . . . . . . . . . . . . IV, 8
* Job Description . . . . . . . . . . . . . . . . . . . IV, 9
* Attendance Controller . . . . . . . . . . . . . . . . IV, 10
* Employee Warning Notic . . . . . . . . . . . . . . . . IV, 11
* Positive Performance Report . . . . . . . . . . . . . IV, 12
* Employment Review & Performance Evaluation . . . . . . IV, 13
* Exit Interview . . . . . . . . . . . . . . . . . . . . IV, 14

Operation & Financial Forms:

* Daily Sales Worksheet . . . . . . . . . . . . . . . . IV, 15
* Daily Prep List . . . . . . . . . . . . . . . . . . . IV, 16
* Weekly Sales Recap . . . . . . . . . . . . . . . . . . IV, 17
* Inventory Worksheet . . . . . . . . . . . . . . . . . IV, 18
* Waste Control . . . . . . . . . . . . . . . . . . . . IV, 19
* Purchase Recap . . . . . . . . . . . . . . . . . . . . IV, 20
* Inter-Unit Transfer . . . . . . . . . . . . . . . . . IV, 21
* P & L Worksheet . . . . . . . . . . . . . . . . . . . IV, 23
* Sales Comparison . . . . . . . . . . . . . . . . . . . IV, 24
* Incident Report . . . . . . . . . . . . . . . . . . . IV, 25
* Personnel Tracking . . . . . . . . . . . . . . . . . . IV, 26
* Purveyor Phone List . . . . . . . . . . . . . . . . . IV, 27
* Coupon Tracking . . . . . . . . . . . . . . . . . . . IV, 28

- 19 -

<PAGE>

V. APPROVED VENDORS & LABELS

Bakery ingredients. . . . . . . . . . . . . . . . . . . . . . V, 1
Beverages . . . . . . . . . . . . . . . . . . . . . . . . . . V, 3
Breads & Bakery other . . . . . . . . . . . . . . . . . . . . V, 4
Cream Cheese. . . . . . . . . . . . . . . . . . . . . . . . . V, 5
Dairy . . . . . . . . . . . . . . . . . . . . . . . . . . . . V, 6
Food other . . . . . . . . . . . . . . . . . . . . . . . . . V, 7
Produce . . . . . . . . . . . . . . . . . . . . . . . . . . . V, 9
Uniforms . . . . . . . . . . . . . . . . . . . . . . . . . . V, 10
Clothing novelty . . . . . . . . . . . . . . . . . . . . . . V, 11
Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . .V, 12

VI. ROLE DEFINITIONS

Duties and responsibilities . . . . . . . . . . . . . . . . . VI, 1
Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . VI, 4
Management practices . . . . . . . . . . . . . . . . . . . . VI, 6
Management - Leading by example . . . . . . . . . . . . . . . VI, 8

VII. SITUATION GUIDELINES

Guest relations . . . . . . . . . . . . . . . . . . . . . . . VII, 1
Handling complaints . . . . . . . . . . . . . . . . . . . . . VII, 3
Employee confrontations . . . . . . . . . . . . . . . . . . . VII, 5
Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . VII, 8
Intruders . . . . . . . . . . . . . . . . . . . . . . . . . . VII, 9

VIII. EMPLOYEE RELATIONS

Hiring . . . . . . . . . . . . . . . . . . . . . . . . . . VIII, 1
Orientation . . . . . . . . . . . . . . . . . . . . . . . VIII, 3
Training . . . . . . . . . . . . . . . . . . . . . . . . . VIII, 5
Listening techniques . . . . . . . . . . . . . . . . . . . VIII, 8
Motivation . . . . . . . . . . . . . . . . . . . . . . . . VIII, 10
Monthly staff meetings . . . . . . . . . . . . . . . . . . VIII, 12
Counseling
a. Praise Sessions . . . . . . . . . . . . . . . . . . . VIII, 13
b. Conducting evaluations . . . . . . . . . . . . . . . VIII, 14
c. Discipline sessions . . . . . . . . . . . . . . . . . VIII, 16
d. Documentation . . . . . . . . . . . . . . . . . . . . VIII, 17
e. Executing reprimand . . . . . . . . . . . . . . . . . VIII, 18
f. Terminations . . . . . . . . . . . . . . . . . . . . VIII, 19

- 20 -

<PAGE>

8. Provide you with specifications and/or names of suppliers for all
required equipment, inventory, and supplies. We do not deliver or
install any of these items. (Franchise Agreement - Section 8.1)

9. Provide a pre-opening training program for you or your general manager
and other personnel designated in the NYBE Manual, unless you already
operate a Restaurant and we conclude pre-opening training is not
required. (Franchise Agreement - Section 6.4) A description of our
training program appears later in this Item 11 under the caption
"TRAINING PROGRAMS".

10. Provide initial on-site assistance before opening of your Restaurant if
it is your first Restaurant. (Franchise Agreement - Sections 6.1 and
6.5)

11. Perform an on-site inspection and investigation as we deem appropriate to
become satisfied that you have complied with all requirements necessary
for opening the Restaurant. (Franchise Agreement - Section 5.7)

During the operation of the franchised business, we will:

1. Provide initial on-site assistance after the opening of your Restaurant,
if this is your first Restaurant. Our initial on-site assistance before
and after the opening of your first Restaurant is limited in the
aggregate to approximately ten days. (Franchise Agreement - Section 6.5)

2. Provide additional assistance to you after the opening of your Restaurant
upon your reasonable request and subject to the availability of our
personnel for your payment of a daily assistance fee and related
expenses. See Item 6. (Franchise Agreement - Section 6.5)

3. Modify and add to the NYBE Manual as we deem appropriate to reflect
changes in the business, authorized products or services, or
specifications for authorized products and services, equipment
requirements, quality standards, and operating procedures. (Franchise
Agreement - Section 6.6)

4. Provide additional optional or required training programs or seminars as
we deem appropriate in consideration of your payment of an additional
training fee as described in Item 6. (Franchise Agreement - Sections 6.4
and 7.2) A description of our additional training appears later in this
Item 11 under the caption "TRAINING PROGRAMS".

- 21 -

<PAGE>

5. Maintain and administer a marketing and advertising fund to pay for
developing and preparing advertising materials, if we decide, in our sole
discretion, to establish a marketing and advertising fund. (Franchise
Agreement - Section 9.3) A discussion of the marketing and advertising
fund appears later in this Item 11 under the caption "MARKETING AND
ADVERTISING FUND".

6. Approve or disapprove all advertising and promotional plans and other
materials displaying our Marks which you desire to use which we have not
prepared or previously approved. (Franchise Agreement - Section 9.1)
Additional advertising information appears later in this Item 11 under
the caption "OTHER ADVERTISING INFORMATION".

7. Designate geographic areas for advertising cooperatives if we decide, in
our sole discretion, to establish local or regional advertising
cooperatives. (Franchise Agreement - Section 9.4) A discussion of
advertising cooperatives appears later in this Item 11 under the caption
"LOCAL AND REGIONAL ADVERTISING COOPERATIVES".

8. Suggest prices for goods and services you offer. Our suggested prices
are recommendations only and are not mandatory. (Franchise Agreement -
Section 8.8)

9. Provide you with written notice of your right to purchase from us any
restaurants we have acquired in your Assigned Territory under the
Franchise Agreement or your Assigned Area under the Development Agreement
which operate under proprietary marks other than those used for the
System. (Development Agreement - Section I.C and Franchise Agreement -
Section 2.5)

10. Not unreasonably withhold our approval of the relocation of your
Restaurant within your Assigned Territory. (Franchise Agreement -
Section 2.3)

MARKETING AND ADVERTISING FUND. If we establish the Marketing and
Advertising Fund (the "Marketing Fund"), we will account for it separately from
our other funds. We will not use the Marketing Fund to defray any of our
general operating expenses, except for reasonable salaries, administrative
costs, travel expenses, and overhead as we may incur in activities related to
the administration of the Marketing Fund and all costs of development and
preparing national, regional, point of sale, and local advertising materials for
use within the System. If we establish the Marketing Fund, we shall determine,
in our sole discretion, the nature, theme, and timing of advertising and the
kind and quality of advertising materials to be provided to you through the
Marketing Fund. The advertising may be disseminated via radio, television,
newspaper, or magazines. Your maximum monthly contribution to the Marketing
Fund may not exceed 2% of your Gross Receipts. The franchisees of franchises
which we sold before January 1, 1995 and our affiliates must contribute only a
maximum of 1.5% of their Gross Receipts to the Marketing Fund. If we establish
the Marketing Fund, we will contribute to the Marketing Fund at the same

- 22 -

<PAGE>

percentage of Gross Receipts required of franchisees within the System. If we
establish the Marketing Fund, we will direct through an in-house advertising
department, or our designee, a national or regional advertising agency, will
direct, all advertising and promotional programs and activities, with sole
discretion over the concepts, materials, and media used in these programs and
activities and their placement and allocation. We may spend, on behalf of the
Marketing Fund, in any fiscal year an amount greater or less than the aggregate
contribution of all Restaurants to the Marketing Fund in that year, and the
Marketing Fund may borrow from us or others to cover deficits or invest any
surplus for future use. We will use all interest earned on monies contributed
to the Marketing Fund to pay advertising costs before we expend other assets of
the Advertising Fund. Marketing Fund contributions will not be principally used
to sell additional franchises. We will prepare an annual unaudited statement of
monies collected and costs incurred by the Marketing Fund and furnish it to you
upon written request. We have not yet established the Marketing Fund.
(Franchise Agreement - Section 9.3)

Expenditures by the Marketing Fund may not be proportionate or equivalent
to contributions to the Marketing Fund by Restaurants operating in that
geographic area. You or your Restaurant may not benefit directly or in
proportion to your contribution to the Marketing Fund. Neither we nor the
Marketing Fund shall be liable to you for the maintenance, direction, or
administration of the Marketing Fund, including for contributions, expenditures,
investments, or borrowings, except for acts constituting willful misconduct.
The funds collected by the Marketing Fund, and any earnings thereon, are not and
shall not be an asset of us or any franchisee. (Franchise Agreement - Section
9.3)

LOCAL AND REGIONAL ADVERTISING COOPERATIVES. We can designate
geographical areas to establish local or regional advertising cooperatives
("Cooperatives") for the System. Each Cooperative shall be organized for the
exclusive purpose of administering local and regional advertising programs and
developing, subject to our approval, promotional materials for use by members in
local advertising. No Cooperatives have yet been established. Each Cooperative
will be organized and governed in a form and manner as we shall approve.
Cooperatives will operate under written governing documents which will be
available for review by any member of the Cooperative. These governing
documents may not be modified without our prior consent. The party responsible
for administration of the Cooperatives may vary from Cooperative to Cooperative,
and may be NYBE. NYBE has the power to require Cooperatives to be formed,
changed, dissolved, and merged. Cooperatives will prepare an annual unaudited
statement of monies collected and costs incurred by the Cooperative and will
furnish it to its members upon request. You must contribute to any Cooperative
of which you are a member the amounts determined by the membership of the
Cooperative, up to 2% of your Gross Receipts. We will, for each of our company-
owned Restaurants, make contributions to any applicable Cooperative at the same
percentage of Gross Receipts as is required of franchisees within the
Cooperative. (Franchise Agreement - Section 9.4)

- 23 -

<PAGE>

OTHER ADVERTISING INFORMATION. In addition to the Marketing Fund and
Cooperatives, you must do certain local advertising which includes grand opening
advertising in a minimum amount of $2,500 and spend a minimum of 4% of Gross
Receipts per year for media advertising and promotional materials, including
contributions to the Marketing Fund and Cooperatives. You must submit to us for
approval all advertising materials that we have not prepared or approved. You
must at all times comply with our instructions regarding the use of advertising
materials, including modifying or ceasing to use these materials, whether or not
we previously prepared or approved the materials. You must also submit periodic
reports verifying your local marketing expenditures as requested by us. No
advertising council has yet been established. (Franchise Agreement - Section
9.1) See also Items 6, 8, and 9.

CASH REGISTERS/COMPUTER SYSTEMS. You must keep books and business
records according to our formats. (Franchise Agreement - Section 10.1) In
addition, you must buy or use a Panasonic 5000 (or equivalent) point of sale
system, which is available from third party vendors. (Franchise Agreement -
Section 10.1) The Panasonic 5000 point of sale system features a continuous
sealed tape with non-resettable totals, management report capability, security
controls, and preset pricing capability.

SITE SELECTION. The Development Agreement grants you an Assigned Area
within which to establish and operate Restaurants at specific locations, each to
be designated in a separate Franchise Agreement. You must timely complete the
development schedule in the Development Agreement, but otherwise there is no
specified time limit in which you must locate your site for the Restaurant.
Before the acquisition by lease or purchase of any site for a Restaurant, you
must submit to us, in the form we specify, a description of the site, a market
feasibility study for the site, and other information and materials as we may
reasonably require, together with evidence satisfactory to us which confirms
your favorable prospects for obtaining a site. We will have 15 days after the
receipt of this information from you to approve or disapprove, in our sole
discretion, the site as the location for the Restaurant. If we do not
disapprove the site within the 15 days, the site will be deemed approved by us.
Within 45 days after site approval by us, you must (i) sign a lease (if the
premises are to be leased) after our prior written approval of the lease terms,
which approval will not be unreasonably withheld, or a binding agreement to
purchase the site, and (ii) sign a Franchise Agreement for the approved site.
(Development Agreement - Section III.B) Our approval of the site (and the lease
or purchase agreement for the site) does not in any way guarantee that the site
will become a profitable Restaurant.

If the site is disapproved or is otherwise not feasible, you may elect to
submit a second site proposal within 90 days after the receipt of our
disapproval of the site on the same terms and conditions as the first site
approval request. If you fail to submit a site proposal which we find to be
feasible, we will not refund any amounts paid to us. The factors we consider in
approving or disapproving a proposed site will include, without limitation, the
general location and

- 24 -

<PAGE>

neighborhood, visibility and access from major traffic arteries, available
parking, physical characteristics of existing buildings, competing businesses,
lease terms, and proximity to shopping centers and other commercial activities.

TIME FROM AGREEMENT TO FIRST OPENING. You must request and receive our
approval of the proposed site and layout before commencing construction on the
Restaurant. You must construct and open the Restaurant under the time sequence
specified in the Franchise Agreement. (Franchise Agreement - Sections 5.1, 5.2,
5.3, 5.6, and 5.7) During the past fiscal year, the approximate length of time
required for site approval was 45 to 90 days. You must diligently pursue the
completion of the Restaurant premises in accordance with the plans and
specifications in order for the Restaurant to be ready to open for business
within 90 days after you receive possession of the Restaurant site.

After signing the Franchise Agreement, you must complete construction,
order and install furniture, furnishings, and interior decor, hire and train
personnel, and have a general manager complete our training program. We
estimate that the length of time from the signing a Franchise Agreement to the
opening of the Restaurant will generally be 120 days to 210 days. These
estimated time schedules will not be uniform for all franchisees. The time in
which these steps are to be accomplished may vary based on the location of the
Restaurant, negotiations between us concerning the schedule to be established,
and other matters, including the ability to obtain a lease, financing, or
building permits, zoning and local ordinances, weather conditions, shortages, or
delayed delivery or installation of equipment, fixtures, and signs.

TRAINING PROGRAMS. We will provide a pre-opening training program for
your general manager and the other personnel employed by you in positions
designated in the NYBE Manual. The instructional material used in the pre-
opening training program is the NYBE Manual. Our pre-opening training program
is described in the following table and explanatory notes.

</TABLE>
- 25 -

Hours of
Classroom Hours of On The
Subject(1) Time Begun(2) Training(3) Job Training(2) Instructor(4)
------------ ------------ ------------ --------------- -------------
<S> <C> <C> <C> <C>
Cost Management Note 2 None 16 Franchisee Trainer
Equipment Operation and
Maintenance Note 2 None 100 Restaurant Manager
Staffing and Scheduling Note 2 None 16 Franchisee Trainer
Human Resources Note 2 None 16 Franchisee Trainer
Accounting and Reporting Note 2 None 24 Franchisee Trainer
Sanitation Note 2 None 16 Franchisee Trainer
Safety Note 2 None 16 Franchisee Trainer
Basic Management Techniques Note 2 None 24 Franchisee Trainer
Review Note 2 None 40 Franchisee Trainer

</TABLE>

Notes:
- ------
1 We may elect not to provide initial training to some or all of your
personnel if you already operate a Restaurant and we conclude that the training
is not required. (Franchise Agreement - Section 6.4) For approximately 60 full
business days, your personnel will receive instruction in the operation of a
Restaurant at one of our Restaurants in Kansas or Oklahoma as specified by us.
(Franchise Agreement - Section 7.2)

2 It is the nature of the restaurant business that all aspects of
training are integrated, that is, there are no definitive starting and stopping
times. The amount of time spent in each area will also depend upon the
background and abilities of your personnel.

3 Our program does not include any classroom training.

4 The instructors will be the manager of the Restaurant in which your
manager and other personnel are training and our franchisee trainer, Markus
K. Scholler. Mr. Scholler's experience is set forth in Item 2 of this Offering
Circular.

We do not charge for this training or service, but you must pay the travel
and living expenses for your manager and other personnel. (Franchise Agreement
- - Section 7.1) Confidentiality agreements may be required as a condition of
attending our training. The training program must be completed to our
satisfaction before opening your Restaurant but there is no specified time by
which you must complete your training. If your general manager or other
employees, in our reasonable determination, do not meet our standard for
knowledge and

- 26 -

<PAGE>

performance, or do not pursue or complete our training program to our
satisfaction, we reserve the right to request that the general manager or
employee(s) be retrained, or that another person be trained and perform the
functions of the category of employee for which the training was offered. We
plan to be flexible in scheduling training to accommodate our personnel, you,
and your personnel. There currently are no fixed training schedules.

We will also provide on-site pre-opening assistance and training. We will
provide the on-site training immediately before the opening of the Restaurant
and after the start of Restaurant operations for an aggregate total of
approximately three to seven days. We will provide the initial on-site training
program to you free of charge.

We may, but are not obligated to, provide training programs for your other
employees. We also may make available other required or optional training
courses, programs, conferences, seminars, and materials. If we require
additional training, you must require your employees to successfully complete
the training. Any additional courses, programs, conferences, and seminars may
be conducted in Wichita, Kansas, Stillwater, Oklahoma, or another location as we
may designate. We may contract with other persons or firms to provide your
training.

We will provide and pay for instructors and facilities for initial
training. You must pay for travel, lodging, and meals for any person attending
training and any wages due your employees during time spent in training. We may
charge a daily training fee at our standard rate, which currently is $75 per
day, for instruction and course materials for training programs other than
initial training. We may require confidentiality agreements from your employees
as a condition of attending our training.

ITEM 12

TERRITORY

The Development Agreement grants you an Assigned Area within which we will
not establish, nor franchise anyone other than you to establish, any Restaurants
before the expiration of the development schedule if you comply with all the
terms and conditions of the Development Agreement. We will generally identify
the Assigned Area by one or more Designated Market Areas on the current Nielsen
Wall Map published by the A.C. Nielsen Company, or as a state, city, county, or
other political subdivision. The description of the territory will vary from
area to area depending upon population densities, demographic trends, and other
factors affecting a specific franchise area. Before signing the Development
Agreement, we will describe the Assigned Area by attaching a description of the
area as an exhibit to the Development Agreement.

- 27 -

<PAGE>

The territorial exclusivity we grant to you does not depend upon the
achievement of a certain sales volume, market penetration, or any other
contingency, except as stated in the next paragraph. The next paragraph
describes the only circumstances under which the Assigned Area granted to you
may be altered before the expiration or termination of the Development
Agreement.

Upon any default by you under the Development Agreement, at our option, we
(in addition to other remedies) may reduce the number of options for Restaurants
granted to you, reduce the size of the Assigned Area, or terminate the
territorial exclusivity granted to you.

The Franchise Agreement will grant an Assigned Territory where we will not
establish another franchised or company-owned Restaurant under the System. The
Assigned Territory will generally be identified by a radius from a specific
location (typically two and one-half miles), a particular standard metropolitan
statistical area, or a city, county, or other political subdivision. The radius
or other description of the territory may vary from Restaurant to Restaurant
depending upon population densities, business districts, demographic trends, and
other factors affecting a specific franchise location. Before signing the
Franchise Agreement, we will describe the Assigned Territory by inserting a
description of the approved franchise location and exclusive area in the
Franchise Agreement. Relocation of a Restaurant requires our consent.

You must use the Restaurant premises solely for the operation of a NEW YORK
BAGEL CAFE & DELI Restaurant. We condition your territorial exclusivity upon
maintaining in effect the Franchise Agreement by complying with its terms and
not committing a default, but it does not depend upon achievement of a certain
sales volume, market penetration, or other contingency.

You do not receive the right to acquire additional franchises within your
Assigned Territory or otherwise. You may, however, apply to purchase an
additional franchise within your Assigned Territory to operate another
Restaurant. You can solicit customers and accept orders from outside your
Assigned Territory. Likewise, we, our affiliates, and other franchisees can
solicit customers and accept orders within your Assigned Territory. However,
you may only make over-the-counter sales at retail to the ultimate consumer of
the products you offer for sale at your Restaurant.

We have not established or franchised another to establish restaurants in
your Assigned Area or your Assigned Territory, nor do we have the right under
the Development Agreement or Franchise Agreement to establish restaurants or
franchise another to establish restaurants within your Assigned Area or your
Assigned Territory. While we have no current plans to do so, neither the
Franchise Agreement nor the Development Agreement restrict our ability to
establish another channel of distribution for the products sold at your
Restaurant, which may be sold using the Marks or any other trademark.

- 28 -

<PAGE>

We have no present plans to do so, but the Development Agreement and
Franchise Agreement contemplate the possibility that we may acquire (by
purchase, merger, or otherwise) the stock or assets of a business enterprise
which, directly or through franchisees, operates restaurants under proprietary
marks other than those used in the System selling the same, similar, or
different products and services with your Assigned Area or your Assigned
Territory (whether one or more, "Non-System Restaurants"). These acquisitions
are permitted, and the Development Agreement and Franchise Agreement provide
that we may own and operate acquired Non-System Restaurants within your Assigned
Area or your Assigned Territory, subject to certain rights of first refusal in
your favor for Non-System Restaurants over which we acquire actual ownership and
the right to sell under applicable law.

You shall have the right and option, exercisable within 30 days after
receipt of written notification, to provide written notice to us that you desire
to purchase all of the Non-System Restaurants in your Assigned Area or your
Assigned Territory and to convert the Non-System Restaurants to Restaurants
under the Systems. If you elect to purchase and convert the Non-System
Restaurants, you must complete the purchase and sign our then-current form of
Franchise Agreement (which shall require payment of the then-current initial
franchise fee) within 60 days from the date of notice to us or your election to
purchase and convert. Your purchase price for the Non-System Restaurants shall
be the cash equivalent of our cost for each of the Non-System Restaurants, as we
determine in our sole discretion.

If you do not elect to purchase and convert the Non-System Restaurants as
described above, we may sell the Non-System Restaurants to a third party and/or
continue to operate the Non-System Restaurants under proprietary marks other
than those used in the System. When the Development Agreement expires, we may
convert the Non-System Restaurants to Restaurants under the System, subject to
any contrary provisions contained in any applicable Franchise Agreement between
you and us. Under the Franchise Agreement, if you do not elect to purchase and
convert the Non-System Restaurants as described above, we may sell the
restaurants to a third party and/or continue to operate the Non-System
Restaurants under proprietary marks other than those used in the System.

ITEM 13

TRADEMARKS

NYBE grants you the right to operate a restaurant under the name "NEW YORK
BAGEL CAFE & DELI". You may also use our other current or future trademarks to
identify your Restaurant and the services and products related to the System.
By "trademark", we mean trade names, trademarks, advertising, or other
commercial symbols, service marks, and logos used to identify your Restaurant.
Our principal trademarks are:

[GRAPHIC]

- 29 -

<PAGE>

"LIKE BREAD, WITH AN -Registered Trademark-
ATTITUDE"

[GRAPHIC]

"Registered Mark" "NYB Mark"

The Registered Mark and the NYB Mark are collectively referred to as the
"Principal Marks." Only the Registered Mark is currently registered with the
United States Patent and Trademark Office. By not having a Principal Register
federal registration for any of our trademarks other than the Registered Mark,
we do not have certain presumptive legal rights granted by a registration. We
intend to file an application for the registration of the NYB Mark with the
United States Patent and Trademark Office. We filed an application to register
a prior version of the NYB Mark in 1995, and an Office Action of the United
States Patent and Trademark Office issued in response to our prior application
would have required us to disclaim any exclusive right to use "NYB," "New York,"
and "Bagel Shop & Delicatessen" apart from the mark as shown as a condition to
registration of the prior mark on the Principal Register of the United States
Patent and Trademark Office. Because we decided to make changes to the prior
mark, we abandoned the prior registration. We anticipate that in response to
our planned application for registration of the NYB Mark, we will receive a
similar Office Action which will require us to disclaim any exclusive right to
use "NYB," "New York," and "Bagel Shop & Cafe" apart from the mark as shown as a
condition to registration of the NYB Mark on the Principal Register of the
United States Patent and Trademark Office. Until the NYB Mark is filed and
registered with the United States Patent and Trademark Office, others are
permitted to establish rights to use the servicemark. This will not be in areas
where our franchises are operating or advertising under the trademark, or in the
natural zone of expansion for our affiliate's restaurants. In addition, these
users must act in good faith and without actual knowledge of our prior use of
the servicemark. However, if others establish rights to use the NYB Mark before
its federal registration is effective or if registration is denied, we may not
be able to expand into these areas using the NYB Mark.

The Registered Mark was placed on the Principal Register of the United
States Patent and Trademark Office on April 23, 1996, Reg. No. 1,969,972. We
have filed all required affidavits.

There are no other currently effective material determinations of the
Patent and Trademark Office, the Trademark Trial and Appeal Board, the trademark
administrator of any state or any court, nor is there any pending material
litigation involving our Principal Marks.

We claim common-law rights to the service marks "New York Bagel Cafe &
Deli", "New York Bagel Shop & Delicatessen," "NYB", "The City's Best Bagel",
"Where Yeast Meets

-30-
<PAGE>

West," and "Like Bread, With An Attitude," but there have not been judicial
determinations of the existence, validity, or extent of our rights. We claim
and intend to rely on common-law trade secret and unfair competition protection
of materials and information you are granted the right to use under the
Franchise Agreement. However, there are and will be many restaurants and other
businesses nationwide that use the words "New York", "Bagel Shop", "Cafe",
"Delicatessen" and/or other similar words and phrases. Given this, legal
challenges could be made to your use of the "New York Bagel Cafe & Deli" name,
and if successful, these challenges could render you liable for damages and
require that you stop using the name. You might also be unable to prevent use
of the name by others.

There are no agreements currently in effect that significantly limit our
rights to use or license the use of the Principal Marks in any manner material
to the franchise. You must follow our rules when you use our trademarks. You
cannot use our name or trademarks as part of a corporate name or with modifying
words, designs, or symbols. You may not use our trademarks for the sale of an
unauthorized product or service or in a manner not authorized in writing by us.

We intend to take reasonable steps to preserve and protect our ownership of
the Marks and their validity. We are not obligated to protect any rights
granted to you to use the trademarks or to protect you against claims of
infringement or unfair competition regarding the trademarks. Nevertheless, it
may be in our best interest to do so.

You must notify us immediately when you learn about an infringement of or
challenge to your use of the trademarks. NYBE will take the action we think is
appropriate. You must cooperate fully in prosecuting, defending, or settling
any litigation involving the trademarks, including being named as a party in the
action at our request. We will undertake the defense of the litigation and will
bear the costs of the litigation, except for the costs of any legal counsel
separately retained by you.

We do not know of any infringing uses that could materially affect your use
of our Principal Marks. You must modify or discontinue the use of a trademark
if we modify or discontinue the use of a trademark as a result of a proceeding
or settlement. You also must not directly or indirectly contest our right to
our trademarks, trade secrets, or business techniques that are part of our
business. You must maintain the confidentiality of the NYBE Manual and any
other manuals created for or approved for use in the operation of the
Restaurant, and the information contained in the manuals.

-31-
<PAGE>

ITEM 14

PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION

There are no patents that are material to the franchise. We claim
copyright protection of our NYBE Manual, and advertisement and promotional
materials although these materials have not been registered with the United
States Registrar of Copyrights. These materials contain secret recipes, methods
of preparation and service of our food products, and other information relevant
to the operation of a Restaurant. We consider this information proprietary and
confidential and we consider it to be our property and you may use it only as
provided in the Franchise Agreement. You must implement our procedures to
prevent the unauthorized use and disclosure of our proprietary information and
to notify us immediately if there is any unauthorized use or disclosure of our
proprietary information.

There currently are no effective determinations of the Copyright Office
(Library of Congress) or any court regarding any of the copyrighted materials.
There are no agreements in effect which significantly limit our right to use or
license the copyrighted materials. Finally, there are no infringing uses
actually known to us which could materially affect your use of the copyrighted
materials in any state. We are not required by any agreement to protect or
defend copyrights.

We will disclose to you confidential or proprietary information and trade
secrets. You must sign a Confidentiality Agreement attached to this Offering
Circular as Exhibit F (the "Confidentiality Agreement") before your review of
our confidential and proprietary information to evaluate whether to purchase a
franchise. Except as necessary for operation of the Restaurant and as we
approve, neither you nor your officers, directors, partners, members, managers,
or owners may, during the term or at any time after the expiration or
termination of the Franchise Agreement, regardless of the cause of termination,
directly or indirectly, use for your own benefit or communicate or divulge to,
or use for the benefit of any other person or entity, any trade secrets,
confidential information, knowledge or know-how concerning the recipes, food
products, advertising, marketing, designs, plans, or methods of operation of the
Restaurant or the System. Upon our request, you must have your officers,
directors, partners, members, managers, or owners sign a Covenant Agreement
attached to this Offering Circular as Exhibit E (the "Covenant Agreement"). You
may disclose to your employees only the confidential, proprietary, or trade
secret information necessary to operate the business and then only while the
Franchise Agreement is in effect. All information and knowledge, including
drawings, materials, equipment, marketing, recipes, and other data, which we
designate as secret or confidential will be deemed secret and confidential under
the Franchise Agreement and the Covenant Agreement.

-32-
<PAGE>

ITEM 15

OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION
OF THE FRANCHISE BUSINESS

We will grant the Franchise Agreement to you in reliance on your and your
principals' personal and collective business skills and financial capacity, and
your rights and obligations may not be transferred without our written consent.
You must remain ultimately responsible for the operation of the Restaurant in
compliance with the Franchise Agreement and should exercise oversight and be
informed about the operations of the franchise, but you (or your chief operating
officer, managing partner, or principal manager) are not required to take any
specific role in day-to-day operations or to participate personally in direct
operations on the premises, if you designate a general manager, who may be your
employee, who shall devote full time and attention to the management and
operation of the Restaurant. The general manager may be any qualified
individual who attends and successfully completes our initial training program.
The individual need not be one of your owners if you are a corporation,
partnership, or limited liability company. If, at any time for any reason, the
general manager or managing owner no longer qualifies, you must promptly
designate another general manager or managing owner subject to the same
qualifications listed above and notify us.

Management responsibility includes, without limitation, presence of a
manager during all business hours; maintaining the highest standards of product
quality and consistency; maintaining the Restaurant in the highest condition of
sanitation, cleanliness, and appearance; and supervising employees to ensure
that the highest standard of service is provided and to insure that your
employees deal with customers, suppliers, us, and all other persons in a
courteous and polite manner.

If you are a corporation, partnership, or limited liability company, your
owners must personally guarantee your obligations under the Franchise Agreement
and Development Agreement. In addition, your partners, owners, officers,
directors, managers, and members must also agree to be personally bound by, and
personally liable for the confidentiality and non-competition provisions of the
Franchise Agreement and/or Development Agreement and sign the Covenant
Agreement, all as described in Item 14 and Item 17. Your owners must also agree
to certain restrictions on the transfer of their ownership interests.

-33-
<PAGE>

ITEM 16

RESTRICTIONS ON WHAT
THE FRANCHISEE MAY SELL

You must operate the Restaurant in conformance with our standard
specifications and techniques as contained in the NYBE Manual, as amended by us
in our sole discretion from time to time. As described in Items 8, 9, and 12,
in order to promote substantial uniformity of quality and shared identity at all
Restaurants, you must not offer for sale any product or service or purchase,
lease, install, or use any equipment, fixtures, furnishings, concept, supply,
vending machine, building design or layout, color schemes or other item or
service unless approved in writing by us as being in compliance with our
standards and specifications and the franchise System. You must offer all of
the food products and services that we designate as required for all
franchisees. We can change the types of authorized food items and services that
you must offer for sale. There are no limits on our right to do so. You must
use the premises of the Restaurant solely for the purpose of operating a NEW
YORK BAGEL CAFE & DELI Restaurant and to refrain from using the premises for any
other purpose or activity. Restrictions on goods and services offered may also
arise from Franchise Agreement requirements that you comply with our high
standards of quality and service, to refrain from deviating from our standards,
or to otherwise operate in any manner adversely affecting the System, the Marks,
and the goodwill associated with the System and the Marks, and to comply with
the highest health standards and ratings applicable to the franchise restaurant.
You are not restricted regarding the customers you may solicit, but you may only
make sales over-the-counter at retail to the ultimate consumers of the products
to be offered for sale by your Restaurant.

ITEM 17

RENEWAL, TERMINATION, TRANSFER
AND DISPUTE RESOLUTION

THIS TABLE LISTS IMPORTANT PROVISIONS OF THE FRANCHISE AGREEMENT. YOU SHOULD
READ THESE PROVISIONS IN THE FRANCHISE AGREEMENT ATTACHED TO THIS OFFERING
CIRCULAR.

SECTION IN
FRANCHISE
PROVISION(1) AGREEMENT SUMMARY
- --------------------------------------------------------------------------------

a. Term of the franchise Section 3.1 Term is equal to 10 years.

b. Renewal or extension Section 3.2 Ten-year renewal if you meet
of the term certain requirements.

-34-
<PAGE>

SECTION IN
FRANCHISE
PROVISION(1) AGREEMENT SUMMARY
- --------------------------------------------------------------------------------

c. Requirements for you Section 3.2 Give notice, remodel, not be in
to renew or extend default, have paid all amounts
owed us in timely manner, sign
new Franchise Agreement, pay fee,
sign release, and comply with
training requirements.

d. Termination by you Section 14.1.F Upon 90 days' written notice if,
you are a person and die or
become mentally incompetent and
are unable or elect not to
transfer your interest in the
franchise, if you are the general
manager and become disabled and
elect not to employ a new general
manager, or you are unable to
operate the Restaurant at a
profit after using reasonable and
diligent efforts.

e. Termination by NYBE None
without cause

f. Termination by NYBE Sections 14.1.C, We can terminate only if you
with cause 14.1.D, and default.
14.1.E

g. "Cause" defined - Sections 14.1.D You generally have 30 days to
which defaults which and 14.1.E cure: nonpayment of fees; failure
can be cured to submit reports, provide
information, or maintain our
standards; or any other default
not specified in Section 14.1.C.

h. "Cause" defined - Section 14.1.C Non-curable defaults: failure to
defaults which cannot timely open the Restaurant, cease
be cured operating or abandon the
Restaurant, forfeit the right to
do business where the Restaurant
is located, conviction of felony,
unapproved transfers, improper
use or disclosure of confidential
information, false reporting or
submissions to us, under-
reporting Gross Revenue, repeated
defaults even if cured, entry of
judgment against you which
remains unsatisfied for 30 days,
levy against your business or
property, action brought to
foreclose lien or mortgage
against the Restaurant premises
or equipment which is not
dismissed in 30 days, or you
become insolvent, a receiver is
appointed to take possession of
your business or property, or you
make a general assignment for the
benefit of your creditors.

-35-
<PAGE>

SECTION IN
FRANCHISE
PROVISION(1) AGREEMENT SUMMARY
- --------------------------------------------------------------------------------

i. Your obligations on Sections 15.1, Cease operating the Restaurant,
termination/non- 15.2, 15.3, discontinue use of the Marks and
renewal 15.4,15.5, advertising, complete
15.6, 15.7, deidentification as our
15.8, 15.9, franchisee, transfer telephone
15.10, 15.11, numbers and listing to us,
and 15.12 deliver all materials and
documents for the Restaurant to
us, modification and alteration
of Restaurant, cease using the
System and NYBE Manual, sell to
us at your cost all your usable
materials bearing the marks, sell
your office equipment, furniture,
fixtures, and movable signs to us
at their fair market value,
promptly pay all amounts due us
including the liquidated damages
set forth in Section 15.11, and
maintain and preserve your
financial and other records and
make them available for our
inspection.

j. Assignment of Section 13.1 No restriction on our right to
contract by NYBE assign.

k. "Transfer" by you - Section 13.2 Includes transfer of any interest
definition in contract or assets, or any
ownership change.

l. NYBE's approval of Sections 13.2 We have the right to approve all
transfer by franchisee and 13.8 transfers, except that if you are
a corporation, partnership, or
limited liability company, you
may transfer an aggregate up to
25% of your outstanding voting
ownership interests to your
employees who are actively
engaged in the operations of the
Restaurant without our approval
if the proposed transfer alone or
together with other transfers
will not have the effect of
transferring a controlling
ownership interest in you.

m. Conditions for Section 13.3 You have paid all amounts owed
NYBE approval of to us and others, you are not in
default under the Franchise
Agreement or any other agreement
with us, you have signed a
release, you and the new
franchisee enter into a
satisfactory assignment and
assumption agreement providing
that the new franchisee will
honor all of your obligations
under the agreement, the new
franchisee qualifies, the new
franchisee signs our then-current
form of Franchise Agreement, you
remain liable for all your
obligations, the new franchisee
completes our training program,
and we receive payment of the
$2,500 transfer fee.

n. NYBE's right of Section 13.2 We can match any offer for any
first refusal to interest in your Franchise
acquire your business Agreement, the Restaurant, or
you.

-36-
<PAGE>

SECTION IN
FRANCHISE
PROVISION(1) AGREEMENT SUMMARY
- --------------------------------------------------------------------------------

o. NYBE's option to Section 15.8 Upon termination of the
purchase your business Franchise Agreement for any
reason, we have the option for 60
days following the termination to
purchase at your cost all your
usable materials bearing the
Marks and/or to purchase your
office equipment, furniture,
fixtures, and moveable signs at
their fair market value.

p. Your death or Section 13.6 Upon the death or mental
disability incompetency of any person with
an interest in the franchise or
in you, if you are a corporation,
partnership, or limited liability
company, the person's personal
representative must transfer the
interest within six months after
the death or mental incompetency.
We must approve all transfers,
including transfers by will or
inheritance (also see m above).
If the person's heirs or
beneficiaries are unable to
satisfy the conditions of the
agreement, the personal
representative will have a
reasonable time to dispose of the
interest. If the interest is not
disposed of in a reasonable time,
we may terminate the Franchise
Agreement and purchase certain of
your assets (also see o above).

q. Non-competition Section 11.5 No involvement in competing
covenants during business anywhere.
the term of the
franchise(2)

r. Non-competition Section 11.5 No competing business for 2 years
covenants after the after assignment or termination
franchise is within your Assigned Territory,
terminated or the then-current Designated
expires(2) Market Area or Areas (DMA) in
which your Assigned Territory is
located, or the DMA of any other
NYBE Restaurant then existing.

s. Modification of Article 20 No modifications generally
the agreement unless in writing signed by you
and one of our officers but NYBE
Manual subject to change.

t. Integration/ Article 20, Only the terms of the Franchise
merger clause Sections 21.1 Agreement are binding (subject to
and 22.2 state law). Any other promises
may not be enforceable.

u. Dispute resolution Sections 19.1, All disputes must be mediated
by arbitration 19.2, and 19.3 and then arbitrated in Wichita,
or mediation(3) Kansas. The mediation and
arbitration proceedings are
governed by rules of the American
Arbitration Association.

v. Choice of forum Section 21.11 Litigation in Sedgwick County,
Kansas.

w. Choice of law Section 21.2 Kansas law applies.

-37-

<PAGE>

NOTES:

1 Your owners must guarantee all of your obligations in the Franchise
Agreement and the Development Agreement.

2 All of your partners, owners, officers, directors, managers, and members
must also honor all of your obligations in Article 11 of the Franchise
Agreement. Upon our request, you must have your officers, directors, partners,
members, managers, and owners sign a Covenant Agreement which includes similar
non-competition covenants.

3 We also impose the obligations to engage in mediation and arbitration on
your officers, directors, partners, members, managers, and owners.

THIS TABLE LISTS IMPORTANT PROVISIONS OF THE DEVELOPMENT AGREEMENT. YOU SHOULD
READ THESE PROVISIONS IN THE AGREEMENT ATTACHED TO THIS OFFERING CIRCULAR.

Section in
Development
Provision(1) Agreement Summary
- --------------------------------------------------------------------------------

a. Term of the franchise Section IV.A The date of our signing a
franchise agreement for the last
Restaurant to be established
under your development schedule.

b. Renewal or extension Section IV.B If we determine that it would be
of the term desirable to establish additional
Restaurants in your Assigned
Area, you will have a right of
first refusal to purchase options
to establish these new
Restaurants.

c. Requirements for you Section IV.B Successful completion of your
to renew or extend development schedule, current
compliance with all your
franchise agreements, sign and
return a new development
agreement containing our then-
current terms and conditions
within 60 days of your receipt of
the agreement from us, and pay
development fee.
d. Termination by you None

e. Termination by NYBE None
without cause

f. Termination by NYBE Section VI We can terminate only if you
with cause commit one of several listed
violations.

g. "Cause" defined - None
which defaults which
can be cured

-38-

<PAGE>

Section in
Development
Provision(1) Agreement Summary
- --------------------------------------------------------------------------------

h. "Cause" defined - Section VI Failure to comply with
defaults which cannot development schedule, any
be cured franchise agreement, or any other
agreement between us, or make an
improper transfer. You are
adjudicated a bankrupt or become
insolvent, a receiver is
appointed and takes over your
substantially all of your
property, you make a general
assignment for the benefit of
creditors, or you are the subject
of a bankruptcy petition which is
not dismissed within 90 days.

i. Your obligations on Section VI.D No continued right to develop
termination/non- Restaurants in your Assigned
renewal Area. Continued compliance with
franchise agreements for existing
Restaurants.

j. Assignment of Section VII.A No restriction on our right to
contract by NYBE assign.

k. "Transfer" by you - Section VII.B Governed by same terms as
definition Franchise Agreement.

l. NYBE's approval of Section VII.B Governed by same terms as
transfer by Franchise Agreement.
franchisee

m. Conditions for NYBE Section VII.B Governed by same terms as
approval of Franchise Agreement.
n. NYBE's right of first Section VII.B Governed by same terms as
refusal to acquire Franchise Agreement.
your business

o. NYBE's option to None
purchase your
business

p. Your death or Section VII.B Governed by same terms as
disability Franchise Agreement.

q. Non-competition Section VIII No involvement in competing
covenants during the business anywhere.
term of the
franchise2

r. Non-competition Section VIII No competing business for 2 years
covenants after the after any transfer or termination
franchise is of the Development Agreement
terminated or within your Assigned Area, the
expires2 then-current Designated Market
Area or Areas (DMA) in which your
Assigned Area is located, or the
DMA of any other NYBE Restaurant
then existing.

s. Modification of the Section XIV No modifications unless in
agreement writing signed by you and one of
our authorized officers.

-39-

<PAGE>

Section in
Development
Provision(1) Agreement Summary
- --------------------------------------------------------------------------------

t. Integration/ merger Section XIV Only the terms of the Development
clause Agreement are binding (subject to
state law). Any other promises
may not be enforceable.
u. Dispute resolution by Section XV All disputes must be mediated and
arbitration or then arbitrated in Wichita,
mediation3 Kansas. The mediation and
arbitration proceedings are
governed by rules of the American
Arbitration Association.

v. Choice of forum Section XV Litigation in Sedgwick County,
Kansas.

w. Choice of law Section XV Kansas law applies.

NOTES:

(1) Your owners must guarantee all of your obligations in the Franchise
Agreement and the Development Agreement.

(2) All of your partners, owners, officers, directors, managers, and members
must also honor all of your obligations in Article 11 of the Franchise
Agreement. Upon our request, you must have your officers, directors, partners,
members, managers, and owners sign a Covenant Agreement which includes similar
non-competition covenants.

(3) The obligations to engage in mediation and arbitration are also imposed on
your officers, directors, partners, members, managers, and owners.

These states have statutes which may supersede the franchise agreement in
your relationship with the franchisor including the areas of termination and
renewal of your franchise: ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. &
Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et
seq.], DELAWARE [Code, tit.], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [Rev.
Stat. Chapter 121 1/2 PARA 1719-1720], INDIANA [Stat. Section 23-2-2.7], IOWA
[Code Sections 523H.1-523H.17], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA
[Stat. Section 80C.14], MISSISSIPPI [Code Section 75-24-51], MISSOURI [Stat.
Section 407.400], NEBRASKA [Rev. Stat. Section 87-401], NEW JERSEY [Stat.
Section 56:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code
13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180], WISCONSIN [Stat.
Section 135.03]. These and other states may have court decisions which may
supersede the franchise agreement in your relationship with the franchisor
including the areas of termination and renewal of your franchise.

-40-

<PAGE>

ITEM 18

PUBLIC FIGURES

NYBE does not use any public figure to promote its franchise.

ITEM 19

REPRESENTATIONS REGARDING EARNINGS CAPABILITY

We do not furnish or authorize our salespersons to furnish any oral or
written information concerning the actual or potential sales, costs, income, or
profits of a NYBE Restaurant. Actual results vary from Restaurant to Restaurant
and we cannot estimate the results of any particular franchise.

-41-

<PAGE>

ITEM 20

LIST OF OUTLETS

FRANCHISED RESTAURANT STATUS SUMMARY
FOR YEARS 1993/1994/1995(1)

Franchises
Canceled or Reacquired By Left the System Total From Left Operating At
State Transfers Terminated Not Renewed NYBE Other Columns(2) Year End
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

Arizona 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
Arkansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/1
Colorado 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
Florida 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
Kansas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/2/1
Missouri 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/1
Nebraska 0/0/1 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1 0/1/2
New Mexico 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
Oklahoma 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1 0/0/1 0/1/0
North Dakota 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
South Carolina 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
Tennessee 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/1/2

-42-

<PAGE>

Texas 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/2/11
Washington 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/1
TOTALS 0/0/1 0/0/0 0/0/0 0/0/0 0/0/1 0/0/2 0/9/25

</TABLE>

<PAGE>

NOTES:

(1) All numbers are as of December 31 for each year.

(2) The numbers in the "Total" column may exceed the numbers for Restaurants
affected because several events may have affected the same Restaurant. For
example, the same Restaurant may have had multiple owners.

-43-

<PAGE>

STATUS OF COMPANY OWNED RESTAURANTS
FOR YEARS 1993/1994/19951

Total Restaurants
Restaurants Closed Restaurants Opened Operating at
State During Year During Year Year End
- --------------------------------------------------------------------------------

Kansas 0/0/0 2/0/0 2/3/3
Oklahoma 0/0/0 0/2/2 7/10/11
Tennessee 0/0/0 0/0/1
TOTALS 0/0/0 2/2/2 9/13/15

NOTES:

1 All numbers are as of December 31 for each year. Prior to December 28,
1995, all of the Company owned Restaurants were owned by affiliates of NYBE
which were merged into NYBE on December 28, 1995.

-44-

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.
FRANCHISED RESTAURANTS
AS OF 12/31/95

State Franchisee Our Unit Nos. Address Telephone No. Number of Units
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Arizona Andy and Marilyn Camarata 110 6165 E. Broadway Blvd. (602) 748-1408 1
Tucson, Arizona 85711

Arkansas Jay Ramsey 109 9101 W. Markham #28 (501) 954-8000 1
Little Rock, Arkansas 72205

Colorado Danny Cowan 113 8055 W. Bowles Ave., 2A-1 (303) 932-2435 1
Joey Gentry Littleton, Colorado 80123

Florida Brian Sanders 121 14394 N. Dale Mabry Hwy. (813) 962-5957 1
Tampa, Florida 33616

Kansas Bagel Capital, Inc. 105 123 S. Mur-len (913) 782-1771 1
Olathe, Kansas 66062

Missouri Bagel Capital, Inc. 107 1100 Main (816) 421-6988 1
Kansas City, Missouri 64105

Nebraska Larry Heinrich 102 2925 S. 108th (402) 397-1010 1
Omaha, Nebraska 68114

Nebraska Larry Heinrich 111 1650 Farnam, #110 (402) 342-2700 1
Omaha, Nebraska 68102

New Mexico Jeff West 112 720 St. Michaels, Suite M (505) 474-5200 1
Santa Fe, New Mexico 87505

- 45 -

<PAGE>

North Dakota Jerry Bunk 123 505 E. Bismarck Expressway (701) 222-4222 1
Bismarck, North Dakota 58504

South Carolina Brian Vrana 120 817 Harden Street (803) 252-6969 1
John Overbeck Columbia, South Carolina 29205

Tennessee Steve Beihel 103 4622 Kingston Pike (423) 588-1364 1
David Wann Knoxville, Tennessee 37919

Tennessee Marc Crosler 117 710 S. Gay Street (423) 546-7777 1
Knoxville, Tennessee 37902

Texas Chris and Tracy Bauman 116 2802 Soncy Road (806) 355-6299 1
Amarillo, Texas 79121

Texas Chris and Tracy Bauman 127 2646 W. 34th (806) 355-1588 1
Amarillo, Texas 79016

Texas Quinpar, Inc. 106 4304 Lemmon Avenue (214) 521-8141 1
Dallas, Texas 75219

Texas Jeremy Parker 115 101 Preston Royal (214) 368-3354 1
Dallas, Texas 75230

Texas Steve and Andrea Gass 114 3020 Legacy Drive (214) 491-0342 1
Plano, Texas 75023

Texas Randa Warren 122 420 Grapevine Hwy., #101 (817) 660-2734 1
Hurst, Texas 76054

Texas Bart Younger 124 606 Embassy Oaks #400 (210) 495-5548 1
San Antonio, Texas 78216

Texas Rick McElhaney 119 5640 Westheimer (713) 626-0330 1
Houston, Texas 77056

Texas Rick McElhaney 126 9600 Woodlakes Sq., #5 (713) 953-1143 1
Houston, Texas 77063

- 46 -

<PAGE>

Texas Kyle Shipley 108 9070 Research Blvd., Suite 303 (512) 467-1700 1
Austin, Texas 78758

Texas Paul Murphy 125 13450 Research Blvd. (512) 258-6969 1
Andrew Lee Austin, Texas 78750

Washington Wayne Gresseth 118 1304 Ocean Beach Hwy. (360) 414-4100 1
Troy Gresseth Longview, Washington 98832
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL 25
- ------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

- 47 -

<PAGE>

PROJECTED OPENINGS
AS OF DECEMBER 31, 1995

Franchise Agreements Projected Franchised Projected Company
Signed but Restaurant New Restaurants in the Openings in the Next
State Not Open(1) Next Fiscal Year Fiscal Year
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Alabama 0 1 0

Arizona 0 2 2

Arkansas 0 1 0

Colorado 0 5 0

Florida 0 1 0

Kansas 0 0 0

Kentucky 0 0 3

Louisiana 0 1 0

Missouri 0 0 1

Nebraska 0 1 0

Oklahoma 0 0 5

New Mexico 0 1 0

North Dakota 0 1 0

South Carolina 0 1 0

Tennessee 0 1 3

Texas 1 12 1

- ----------------------------------------------------------------------------------------------------

TOTALS 1 28 15

</TABLE>

Notes:

1 As of December 31, 1995.

We expect to enter into ten Development Agreements in fiscal year 1996
which will cover territories in the following states: Alabama, Arizona,
Arkansas, California, Florida, Kentucky, Nebraska, and Texas.

- 48 -

<PAGE>

One franchised Restaurant located in Tulsa, Oklahoma was voluntarily closed
in 1995 by its owner, Alan D. Herrman. Mr. Herrman's home address and telephone
number are P.O. Box 261307, Highlands Ranch, Colorado 80163, 303-698-4252. Two
franchised Restaurants located in Houston, Texas were voluntarily closed in
March, 1996 by Rick McElhaney, the owner of such Restaurants. Mr. McElhaney's
home address and telephone number are 7450 River Garden Drive, Houston, Texas
77095, 713-463-9901. Except for these Restaurants, no NYBE franchisees have had
any outlets terminated, canceled, not renewed, or otherwise voluntarily ceased
to do business during our most recently completed fiscal year (January 1, 1995 -
December 31, 1995), or have not communicated with us within ten weeks of the
date of this Offering Circular.

ITEM 21

FINANCIAL STATEMENTS

This Offering Circular includes our audited financial statements for the
periods ended December 31, 1995, December 31, 1994, and December 31, 1993, and
our unaudited financial statements for the period ended May 26, 1996. This
financial information does not include financial data of any of our affiliated
corporations. Our affiliated corporations do not guarantee to assume our duties
and obligations under the Franchise Agreement or Development Agreement.

- 49 -

<PAGE>

ITEM 22

CONTRACTS

The following agreements are attached to this Offering Circular:

Exhibit A - Development Agreement

Exhibit B - Franchise Agreement

Exhibit C - Guaranty (of Franchise Agreement)

Exhibit D - Guaranty (of Development Agreement)

Exhibit E - Covenant Agreement

Exhibit F - Confidentiality Agreement

Exhibit G - Addendum to Lease Agreement

<PAGE>

ITEM 23

RECEIPT

This Offering Circular summarizes provisions of the Franchise Agreement and
other information in plain language. Read this Offering Circular and all
agreements carefully.

If New York Bagel Enterprises, Inc. ("NYBE") offers you a franchise, NYBE must
provide this Offering Circular to you by the earliest of:

(1) The first personal meeting to discuss our franchise; or

(2) Ten business days before the signing of a binding agreement; or

(3) Ten business days before a payment to NYBE.

You must also receive a Franchise Agreement containing all material terms at
least five business days before you sign a Franchise Agreement.

If NYBE does not deliver this Offering Circular on time or if it contains a
false or misleading statement, or a material omission, a violation of federal
and state law may have occurred and should be reported to the Federal Trade
Commission, Washington, D.C. 20580.

I have received a Uniform Franchise Offering Circular dated June 25, 1996.

We have not engaged a franchise broker to offer the franchise in your state.

This offering circular included the following Exhibits:

A. Development Agreement E. Covenant Agreement

B. Franchise Agreement F. Confidentiality Agreement

C. Guaranty (of Franchise Agreement) G. Addendum to Lease Agreement

D. Guaranty (of Development Agreement) H. Financial Statements

- -------------------- ----------------------------------------
Date Franchisee

A detachable copy of this receipt follows the exhibits to this Offering
Circular. Please acknowledge your receipt of this Offering Circular by signing
the copy of the receipt and returning it to us.

-51-
<PAGE>

RECEIPT

This Offering Circular summarizes provisions of the Franchise Agreement and
other information in plain language. Read this Offering Circular and all
agreements carefully.

If New York Bagel Enterprises, Inc. ("NYBE") offers you a franchise, NYBE must
provide this Offering Circular to you by the earliest of:

(1) The first personal meeting to discuss our franchise; or

(2) Ten business days before the signing of a binding agreement; or

(3) Ten business days before a payment to NYBE.

You must also receive a Franchise Agreement containing all material terms at
least five business days before you sign a Franchise Agreement.

I have received a Uniform Franchise Offering Circular dated June 25, 1996.

We have not engaged a franchise broker to offer the franchise in your state.

This Offering Circular included the following Exhibits:

A. Development Agreement E. Covenant Agreement

B. Franchise Agreement F. Confidentiality Agreement

C. Guaranty (of Franchise Agreement) G. Addendum to Lease
Agreement

D. Guaranty (of Development Agreement) H. Financial Statements

- ------------------- -----------------------------------------
Date Franchisee

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

DEVELOPMENT AGREEMENT

Exhibit A

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

DEVELOPMENT AGREEMENT

TABLE OF CONTENTS

SECTION PAGE
- ------- ----
I. Grant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. Development Fee. . . . . . . . . . . . . . . . . . . . . . . . . . 3

III. Development Schedule and Manner of Exercising Options . . . . . . 3

IV. Term and Right of First Refusal. . . . . . . . . . . . . . . . . . 5

V. Duties of the Parties. . . . . . . . . . . . . . . . . . . . . . . 5

VI. Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

VII. Transferability. . . . . . . . . . . . . . . . . . . . . . . . . . 7

VIII. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

IX. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

X. Independent Contractor and Indemnification . . . . . . . . . . . . 10

XI. Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

XII. Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

XIII. Severability and Construction. . . . . . . . . . . . . . . . . . . 11

XIV. Entire Agreement - Applicable Law. . . . . . . . . . . . . . . . . 12

XV. Remedies and Disputes. . . . . . . . . . . . . . . . . . . . . . . 12

XVI. Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Attachment "A" (Development Schedule)
Attachment "B" (Franchise Agreement)

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

DEVELOPMENT AGREEMENT

This Development Agreement, by and between New York Bagel Enterprises,
Inc., a Kansas corporation having its chief executive offices at 250 North
Water, Wichita, Kansas 67202 (hereinafter referred to as "Franchisor"), and
__________________________________________ (hereinafter referred to as
"Developer"), is entered into, on the date of execution by Franchisor, as
indicated below.

W I T N E S S E T H: That;

WHEREAS, Franchisor, as a result of the expenditure of time, skill, effort,
and money has developed and owns a unique and distinctive system (hereinafter
"System") relating to the design, establishment, and operation of restaurants
under the name "New York Bagel Cafe & Deli-TM-" (such name and such other trade
names, service marks, trademarks, logos, emblems, and other indicia of origin as
are now designated or may in the future be designated by Franchisor in writing
as part of the System, hereinafter "Proprietary Marks"), which feature bagels
made fresh daily, sandwiches, salads, soups, beverages, and dessert products;
and

WHEREAS, Developer wishes to obtain certain options for the development of
New York Bagel Cafe & Deli restaurants in the area described in this Development
Agreement.

NOW, THEREFORE, the parties, in consideration of the undertakings and
commitments of each party to the other set forth herein, mutually agree a
follows:

SECTION I.

GRANT

A. Franchisor hereby grants to Developer, pursuant to the terms and
conditions of this Agreement, options to obtain franchises to establish and
operate _______ New York Bagel Cafe & Deli restaurants with bakeries ("Bakery
Restaurants") and _____ New York Bagel Cafe & Deli

-1-
<PAGE>

restaurants without bakeries ("Satellite Restaurants," and together with the
Bakery Restaurants, collectively "Restaurants") within the area described in
Attachment "C" to this Agreement (hereinafter "Assigned Area").

B. Except as otherwise provided in this Agreement or in any applicable
Franchise Agreement, Franchisor shall not establish, nor franchise another to
establish, a Restaurant under the System in the Assigned Area prior to the
expiration of the development schedule set forth in Attachment "A" hereto (the
"Development Schedule"). Prior to the expiration of the Development Schedule,
subject to Developer's right of first refusal described in Section I.C.,
Franchisor retains the right to acquire restaurants and/or to acquire a
franchisor with franchisees which operate restaurants (but not to establish
restaurants or to franchise another to establish restaurants) at any location
within the Assigned Area, which operate under proprietary marks other than those
used in connection with the System for the sale of the same, similar, or
different products and services, on any terms and conditions Franchisor may deem
advisable.

C. Franchisor shall provide written notice to Developer within a
reasonable time upon Franchisor's acquisition prior to the expiration of the
Development Schedule of any restaurants which operate under proprietary marks
other than those used in connection with the System for the sale of the same,
similar, or different products and services which are located in the Assigned
Area (hereinafter, whether one or more, "Non-System Restaurants"). Such notice
shall provide Developer with a right of first refusal to acquire such Non-System
Restaurants from Franchisor on the terms provided below if the sale by
Franchisor of such restaurants to Developer is allowed by applicable law.
Subject to the foregoing, Developer shall have the right and option, exercisable
within 30 days after receipt of such written notification, to provide written
notice to Franchisor that Developer desires to purchase the Non-System
Restaurants and to convert all of such restaurants to Restaurants under the
System. In the event Developer elects to purchase and convert the Non-System
Restaurants, Developer must close on such purchase and execute a Franchise
Agreement in the form attached hereto as Attachment "B" (which shall require
payment of the initial franchise fee) within 60 days from the date of notice to
Franchisor of Developer's election to purchase and convert. The purchase price
to be paid by Developer for the Non-System Restaurants shall be the cash
equivalent of Franchisor's cost for each of the Non-System Restaurants, as
determined by Franchisor in Franchisor's sole discretion. In the event
Developer does not elect to purchase and convert the Non-System Restaurants as
provided in this Section I.C., Developer shall have no further right or option
to acquire such Non-System Restaurants, and Franchisor may sell such restaurants
to a third party and/or continue to operate the Non-System Restaurants under
proprietary marks other than those used in connection with the System. Upon the
expiration of the Development Schedule, Franchisor may convert the Non-System
Restaurants

-2-
<PAGE>

to Restaurants under the System, subject to any contrary provisions contained in
any applicable Franchise Agreement between Developer and Franchisor.

SECTION II

DEVELOPMENT FEE

In consideration of the development rights granted herein, Developer shall
pay to Franchisor upon execution of this Agreement a Development Fee of
$________________, plus an additional $14,000 to be paid for each Bakery
Restaurant opening and $8,000 to be paid for each Satellite Restaurant opening
at the time the Franchise Agreement is executed for each Restaurant (as
described in Section III.B. below), which fees shall be fully earned by
Franchisor upon execution of this Agreement, for administrative and other
expenses incurred by Franchisor and for the development opportunities lost or
deferred as a result of Franchisor's entering into this Agreement with
Developer. Upon payment of the additional $14,000 for a Bakery Restaurant or
$8,000 for a Satellite Restaurant by Developer the initial franchise fee for the
Restaurant set forth in Section 4.1.A of the Franchise Agreement shall be deemed
paid in full.

SECTION III

DEVELOPMENT SCHEDULE AND MANNER OF EXERCISING OPTIONS

A. Developer shall exercise each development option granted hereunder by
entering into a Franchise Agreement, in the form attached hereto as Attachment
"B", with Franchisor for the construction and establishment of a Restaurant at a
location approved by Franchisor. Recognizing that time is of the essence,
Developer agrees to exercise its options in accordance with the Development
Schedule set forth in Attachment "A" hereto. Failure by Developer to have
exercised its options within the time specified in the Development Schedule
shall constitute a default under this Agreement.

B. Prior to the acquisition by lease or purchase of any site for a
Restaurant in the Assigned Area, Developer shall submit to Franchisor in the
form specified by Franchisor a description of the site, a market feasibility
study for the site, and such other information or materials as Franchisor may
reasonably require, together with a letter of intent or other evidence
satisfactory to Franchisor which confirms Developer's favorable prospects for
obtaining the site.

-3-
<PAGE>

Franchisor shall have 15 days after receipt of such information and materials
from Developer to approve or disapprove, in its sole discretion, the site as the
location for the Restaurant. In the event Franchisor does not disapprove the
site by written notice to Developer within the 15 days, such site shall be
deemed approved by Franchisor. Within 45 days of site approval by Franchisor
(or within such additional period as may be agreed upon between the parties
hereto in the event that, after diligent good faith efforts, Developer is unable
to complete the requirements of this Section on a timely basis due to events
beyond Developer's reasonable control), Developer shall execute a lease (if the
premises are to be leased) after obtaining Franchisor's prior written approval
of the lease terms, which approval shall not be unreasonably withheld, or a
binding agreement to purchase the site, and a franchise agreement relating to
the approved site. No extension to such 45 day requirement shall extend the
time periods specified in the Development Schedule for the exercise of options
by Developer. The lease, if any, must contain the following conditions in order
to be approved by Franchisor:

1. That Franchisor shall have the right to enter the premises during
reasonable business hours to make any modification necessary to protect
Franchisor's Proprietary Marks;

2. That in the event a notice of default or termination is delivered
to Developer with respect to the lease, a copy of such notice shall be
delivered concurrently to Franchisor; and

3. That Franchisor shall have the right, but not the duty, to assume
the lease if Developer is in default under the terms and provisions of the
lease or the lease is terminated and/or the franchise agreement expires or
is terminated; and

4. That the term shall be at least ten years including option
periods in favor of Developer.

Developer acknowledges that Franchisor's approval of the site (and the lease or
purchase agreement for the site) does not in any way guarantee that the site
will become a profitable Restaurant. Developer expressly acknowledges that
Franchisor's approval of the site (and the lease or purchase agreement of the
site) shall not be deemed to be or construed as a warranty or guarantee, express
or implied, as to the potential volume, profits, or success of the Restaurant to
be located on the site.

-4-
<PAGE>

SECTION IV

TERM AND RIGHT OF FIRST REFUSAL

A. Unless sooner terminated in accordance with the terms of this
Agreement, the term of this Agreement and all rights granted hereunder (except
for the right of first refusal provided in Section IV.B below) shall expire on
the date of Franchisor's acceptance and execution of a Franchise Agreement for
the last of the Restaurants to be established pursuant to the Development
Schedule.

B. If at any time following Developer's successful completion of the
Development Schedule, Franchisor determines that it is desirable to establish
additional Restaurants under the System in the Assigned Area, and Developer is
then in compliance with all terms and conditions of all Franchise Agreements
between Developer and Franchisor, Developer shall have a right of first refusal
to purchase the options to establish such additional Restaurants upon
Franchisor's then-current terms and conditions. In that event, Franchisor shall
submit to Developer a development agreement offering such options, which
agreement shall supersede in all respects this Agreement, and Developer shall
have 60 days after receipt to execute and return the agreement to Franchisor.
In the event that Developer does not exercise this right of first refusal,
Franchisor may thereafter elect to establish additional Restaurants itself or
grant options to others to do so in the assigned area.

SECTION V.

DUTIES OF THE PARTIES

A. Franchisor shall furnish to Developer the following:

1. A Development Manual, on loan, setting forth site selection
guidelines, and containing a set of prototype plans and specifications (not
for construction) for a Bakery Restaurant and a Satellite Restaurant.

2. On-site evaluation as Franchisor deems advisable in response to
Developer's request for site approval; provided, however, the Franchisor
shall not provide on-site evaluation for any proposed site prior to its
receipt from Developer of a market feasibility study for such site prepared
by Developer pursuant to Section III.B. hereof.

-5-
<PAGE>

B. Developer accepts the following obligations:

1. Developer shall comply with all terms and conditions set forth in
this Agreement.

2. Developer shall at all times preserve in confidence the
Development Manual and any and all materials and information furnished or
disclosed to Developer by Franchisor and designated by Franchisor as
confidential, and Developer shall disclose such information or materials
only to such of its employees or agents who must have access to it in
connection with their employment. Developer shall not at any time, without
Franchisor's prior written consent, copy, duplicate, record, or otherwise
reproduce the Development Manual or other materials or information, in
whole or in part, nor otherwise make the same available to any unauthorized
person.

3. Developer shall comply with all requirements of federal, state,
and local laws, rules, and regulations.

SECTION VI.

DEFAULT

A. The options and territorial rights granted to Developer in this
Agreement have been granted in reliance on Developer's representations and
assurances, among others, that the schedule of development set forth in
Attachment "A" to this Development Agreement will be met by Developer in a
timely manner.

B. Developer shall be deemed in default under this Agreement, and all
rights granted herein shall automatically terminate without notice, if Developer
is adjudicated a bankrupt, becomes insolvent, suffers temporary or permanent
count-appointed receivership of substantially all of Developer's property, makes
a general assignment for the benefit of creditors or suffers the filing of a
voluntary or involuntary bankruptcy petition which is not dismissed within 90
days after filing.

C. If Developer fails to comply with the Development Schedule, fails to
comply with any other terms and conditions of any individual Franchise
Agreement, Development Agreement,

-6-

<PAGE>

or any other agreement between Developer and Franchisor, or makes or attempts to
make a transfer or assignment in violation of Section VII.B. hereof, such action
shall constitute a default under this Development Agreement. Upon such default,
Franchisor, in its discretion, may, without giving Developer prior notice or the
right to cure any such default, do any one or more of the following:

1. Terminate this Agreement and all rights granted hereunder without
affording Developer any opportunity to cure the default, effective
immediately upon Developer's receipt of written notice from Franchisor;

2. Reduce the number of options granted Developer in Section I.A. of
this Agreement;

3. Reduce the territory described in Section I.A. of this Agreement;

4. Terminate the territorial exclusivity granted Developer in
Section I.B. of this Agreement.

D. Upon termination of this Agreement by Developer's default, all
remaining options shall be null and void. Developer shall have no right to
establish or operate any Restaurant for which a Franchise Agreement has not been
executed by Franchisor. No default under this Development Agreement shall
constitute a default under any Franchise Agreement between the parties hereto.

E. No right or remedy herein conferred upon or reserved to Franchisor is
exclusive of any other right or remedy provided or permitted by law or equity.

SECTION VII.

TRANSFERABILITY

A. Franchisor shall have the right to transfer all or any part of its
rights or obligations herein to any person or legal entity.

-7-

<PAGE>

B. Developer understands and acknowledges that the rights and duties set
forth in this Development Agreement are personal to Developer and are granted in
reliance upon the personal qualifications of Developer. Developer has
represented to Franchisor that Developer is entering into this Development
Agreement with the intention of complying with its terms and conditions and not
for the purpose of resale of the developmental rights hereunder. Neither
Developer nor any partner, member, or shareholder thereof shall, without
Franchisor's prior written consent, directly or indirectly, sell, assign,
transfer, convey, give away, pledge, mortgage, or otherwise encumber any
interest in this Development Agreement or in Developer. Any such proposed
assignment occurring by operation of law or otherwise, including any assignment
by the trustee in bankruptcy, without Franchisor's prior written consent shall
be a material default of this Agreement. Franchisor's consent to a transfer of
any interest in this Development Agreement or in Developer shall be subject to
the terms and conditions set forth in Article 13 of the Franchise Agreement
(Attachment "B" hereto), including, without limitation, the right of first
refusal provisions in favor of Franchisor contained therein; provided, however,
if a proposed transfer hereunder would trigger the requirements of Section 13.3
of the Franchise Agreement, the transferee, in lieu of complying with
subsections F through I of Section 13.3 of the Franchise Agreement, shall
execute this Agreement and any ancillary agreements and pay to Franchisor a
transfer fee of $2,500. Notwithstanding any provision to the contrary contained
in this Section VII, Developer may transfer not more than an aggregate of 25% of
the outstanding voting shares or ownership interest of a Developer operating as
a corporation, partnership, or limited liability company to employees of
Developer who are actively engaged in Developer's Restaurant operations, if such
transfers, alone or together with other previous, simultaneous, or proposed
transfers, do not have the effect of transferring a controlling interest (as
reasonably determined by Franchisor) in the Developer. The ownership of such
shares or ownership interest by such employees will be subject to all of the
terms and conditions set forth in this Agreement and the Franchise Agreement,
including, without limitation, Articles 11 and 13 of the Franchise Agreement.
Developer shall provide Franchisor with written notice of any such proposed
transfer and all pertinent information regarding the same not later than thirty
(30) days prior to the proposed date of transfer.

SECTION VIII.

COVENANTS

Developer covenants that, except as otherwise approved in writing by
Franchisor, Developer shall not do or engage in any act prohibited by Article 11
of the Franchise Agreement (Attachment "B"). Developer further covenants that
during the term hereof Developer shall not compete, or be associated, directly
or indirectly as an owner, officer, director, employee,

-8-

<PAGE>

consultant, or otherwise, in any business in competition with the System, and,
for a period of two years after any transfer or termination of this Agreement
for any reason, Developer shall not compete, or be associated, directly or
indirectly as an owner, officer, director, employee, consultant, or otherwise,
in any business in competition with the System which is located within (i) the
Assigned Area, (ii) the Designated Market Area or Areas identified by the then-
current Nielson Wall Map published by the A.C. Nielson Company ("DMA"), in which
the Assigned Area is located, or (iii) the DMA of any other System Restaurant
then existing; provided, however, that passive ownership of less than five
percent (5%) of the outstanding voting securities of a publicly held corporation
(which for purposes of this Agreement means a corporation registered under the
Securities Exchange Act of 1934) shall not be deemed a violation of this
Section. In the event the A.C. Nielson Company discontinues the publication of
Nielson Wall Maps for any reason, Franchisor shall have the right to designate
an alternate generally recognized market identification resource for use in
connection with this Section. Unless the context otherwise requires, the term
"developer" as used in this Section shall include, individually and
collectively, all partners, officers, directors, and holders, directly or
indirectly (and any partners, officers or directors of any such holder), of any
beneficial interest in the development rights granted hereunder, and any
immediate family members of any of such persons.

SECTION IX.

NOTICES

Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by certified mail, return
receipt requested, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:

Notices to Franchisor: New York Bagel Enterprises, Inc.
250 N. Water
Wichita, Kansas 67202
Attn: Franchise Department

Notices to Developer:
---------------------------------

---------------------------------

---------------------------------
Attn:
---------------------------------

-9-

<PAGE>

Any notice by certified mail shall be deemed to have been given at the date
and time of mailing.

SECTION X.

INDEPENDENT CONTRACTOR AND INDEMNIFICATION

A. It is understood and agreed by the parties hereto that this Agreement
does not create a fiduciary relationship between them, that nothing in this
Development Agreement is intended to constitute either party an agent, legal
representative, subsidiary, joint venturer, partner, employee, or servant of the
other for any purpose whatsoever. Each party to this Agreement is an
independent contractor, and neither shall be responsible for the debts or
liabilities incurred by the other.

B. Developer shall hold itself out to the public to be an independent
contractor operating pursuant to this Agreement. Developer agrees to take such
reasonable actions as shall be necessary to that end.

C. Developer understands and agrees that nothing in this Development
Agreement authorizes Developer to make any contract, agreement, warranty or
representation on Franchisor's behalf, or to incur any debt or other obligation
in Franchisor's name; and that Franchisor assumes no liability for, nor shall be
deemed liable by reason of, any act or omission of Developer in Developer's
conduct under this Development Agreement, or any claim or judgment arising
therefrom. Developer shall indemnify and hold Franchisor harmless against any
and all such claims directly or indirectly from, as a result of, or in
connection with Developer's operations hereunder, as well as the costs,
including attorneys' fees, of defending against them.

SECTION XI.

APPROVALS

A. Whenever this Development Agreement requires the prior approval or
consent of Franchisor, Developer shall make a timely written request to
Franchisor therefor; and, except as otherwise provided herein, any approval or
consent granted shall be in writing.

-10-

<PAGE>

B. Franchisor makes no warranties or guarantees upon which Developer may
rely and assumes no liability or obligation to Developer or any third party to
which it would not otherwise be subject, by providing any waiver, approval,
advice, consent, or services to Developer in connection with this Development
Agreement, or by reason of any neglect, delay, or denial of any request
therefor.

SECTION XII.

NON-WAIVER

No failure of Franchisor to exercise any power reserved to it in this
Agreement or to insist upon compliance by Developer with any obligation or
condition in this Development Agreement, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver of
Franchisor's rights to demand exact compliance with the terms of this Agreement.
Waiver by Franchisor of any particular default shall not affect or impair
Franchisor's right in respect to any subsequent default of the same or of a
different nature, nor shall any delay, forbearance, or omission of Franchisor to
exercise any power or right arising out of any breach or default by Developer of
any of the terms, provisions, or covenants of this Agreement, affect or impair
Franchisor's rights, not shall such constitute a waiver by Franchisor of any
rights hereunder or rights to declare any subsequent breach or default.

SECTION XIII.

SEVERABILITY AND CONSTRUCTION

A. The provisions of this Agreement shall be deemed severable.

B. Nothing in this Agreement shall confer upon any person or legal entity
other than Franchisor or Developer and such of their respective successors and
assigns as may be contemplated by Section VII. hereof, any rights or remedies
under or by reason of this Agreement.

-11-

<PAGE>

C. All captions in this Agreement are intended solely for the convenience
of the parties, and none shall be deemed to affect the meaning or construction
of any provision hereof. Time is of the essence of this Agreement in all
respects.

D. All references herein to gender and number shall be construed to
include such other gender and number as the context may require, and all
acknowledgments, promises, covenants, agreements and obligations herein made or
undertaken by Developer shall be deemed jointly and severally undertaken by all
those executing this Agreement on behalf of Developer.

E. This Agreement may be executed in several parts, and each copy so
executed shall be deemed an original.

SECTION XIV.

ENTIRE AGREEMENT - APPLICABLE LAW

This Agreement, the documents referred to herein, and the Attachments
attached hereto constitute the entire, full, and complete agreement between
Franchisor and Developer concerning the subject matter hereof and supersede any
and all prior agreements. No amendment, change, or variance from this Agreement
shall be binding on either party unless executed in writing. This Agreement
shall be governed by the laws of the State of Kansas.

SECTION XV.

REMEDIES AND DISPUTES

A. Developer and Franchisor agree to submit, prior to arbitration, all
unsettled claims, disputes, controversies, and other matters in question between
them arising out of or relating to this Agreement (including but not limited to
any claim that the Agreement or any of its provisions is invalid, illegal, or
otherwise voidable or void), the dealings or relationship between Developer and
Franchisor, or Developer's development of any Restaurant ("Disputes") to
mediation in Wichita, Kansas and in accordance with the Commercial Mediation
Rules of the American Arbitration Association currently in effect. Demand for
mediation shall be made within a reasonable time after cessation of
negotiations.

-12-

<PAGE>

1. Mediation shall be private, voluntary, and nonbinding. Any party
may withdraw from the mediation at any time before signing a settlement
agreement upon written notice to each other party and to the mediator. The
mediator shall be neutral and impartial. The mediator's fees shall be
shared equally by the parties. The mediator shall be disqualified as a
witness, consultant, expert, or counsel for either party with respect to
the matters in Dispute and any related matters.

2. Unless the parties agree otherwise, the entire mediation process
shall be confidential and without prejudice. The parties and the mediator
shall not disclose any information, documents, statements, positions, or
terms of settlement. Nothing said or done or provided by the parties in
the course of mediation shall be reported or recorded or, except as ordered
by a court of competent jurisdiction, placed in any legal proceeding or
construed for any purpose as an admission against interest. Nevertheless,
evidence otherwise discoverable or admissible is not excluded from
discovery or admission as a result of its use in mediation.

If a Dispute cannot be resolved through mediation, the parties agree to submit
the Dispute to arbitration, subject to the terms and conditions of this Section
XV.

B. Subject to subsection A above, all Disputes between Developer and
Franchisor will be submitted for binding arbitration to the American Arbitration
Association on demand of either party. Such arbitration proceeding will be
conducted in Wichita, Kansas and, except as otherwise provided in this
Agreement, will be heard by one arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect. All
matters relating to arbitration will be governed by the federal Arbitration Act
(9 U.S.C. Sections 1 ET.SEQ.) and not by any state arbitration law.

1. The arbitrator will have the right to award or include in his
award any relief which he deems proper under the circumstances, including,
without limitation, money damages (with interest on unpaid amounts from the
date due), specific performance, injunctive relief, and attorneys' fees and
costs, provided that the arbitrator will not have the right to declare any
of Franchisor's proprietary marks generic or otherwise invalid or to award
exemplary or punitive damages. The award and decision of the arbitrator
will be conclusive and binding upon all parties hereto, and judgment upon
the award may be entered in any court of competent jurisdiction.

2. Developer and Franchisor agree to be bound by the provisions of
any limitation on the period of time in which claims must be brought under
applicable law.

-13-

<PAGE>

Developer and Franchisor further agree that, in connection with any such
arbitration proceeding, each must submit or file any claim which would
constitute a compulsory counterclaim (as defined by Rule 13 of the Federal
Rules of Civil Procedure) within the same proceeding as the claim to which
it relates. Any such claim which is not submitted or filed as described
above will be forever barred.

3. Developer and Franchisor agree that arbitration will be conducted
on an individual, not a class-wide, basis, and that an arbitration
proceeding between Developer and Franchisor may not be consolidated with
any other arbitration proceeding involving Developer or Franchisor and
another party.

C. Notwithstanding anything to the contrary contained in this Section XV,
Developer and Franchisor each have the right in a proper case to obtain
temporary restraining orders and temporary or preliminary injunctive relief from
a court of competent jurisdiction; provided, however, that Developer and
Franchisor must contemporaneously submit the Dispute for non-binding mediation
under subsection A above and then for arbitration under subsection B above on
the merits as provided herein if such Dispute cannot be resolved through
mediation. Developer acknowledges that a proper case to obtain temporary
restraining orders and temporary or permanent injunctive relief from a court of
competent jurisdiction contemporaneously with submitting the Dispute to
mediation and then to arbitration shall include, but not be limited to, the
following:

1. Any Dispute involving actual or threatened disclosure or misuse
of the contents of the Development Manual or any other confidential
information or trade secrets of Franchisor;

2. Any Dispute involving the ownership, validity, use of, or right
to use or license Franchisor's marks;

3. Any action by Franchisor to enforce the covenants set forth in
Section VII and Section VIII of the Agreement; and

4. Any action by Franchisor to stop or prevent any threat or danger
to public health or safety resulting from the construction of a Restaurant.

-14-

<PAGE>

The provisions of subsections A and B above are intended to benefit and bind
certain third party non-signatories and will continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.

D. In the event that Developer commences any action against Franchisor
with respect to any Dispute, such action shall be brought only in a federal or
state court sitting within Sedgwick County, Kansas. Developer consents to the
exercise of jurisdiction by courts within Sedgwick County, Kansas over any
claims or counterclaims against Developer.

E. In the event Franchisor incurs legal fees or costs or other expenses
to enforce any obligation of Developer hereunder, or to defend against any
claim, demand, action or proceeding by reason of Developer's failure to perform
or observe any obligation imposed upon Developer by this Agreement, then
Franchisor shall be entitled to recover from Developer the amount of all legal
fees, costs and expenses, including reasonable attorneys' fees, whether incurred
prior to, or in preparation for or contemplation of the filing of any claim,
demand, action, or proceeding to enforce any obligation of Developer hereunder
or thereafter or otherwise.

F. Nothing contained in this Section XV shall bar Franchisor's right to
obtain injunctive relief against threatened conduct that will cause it loss or
damage, under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions

SECTION XVI.

DISCLAIMER

A. Developer acknowledges that the success of the business venture
contemplated by this Agreement involves substantial business risks and will be
largely dependent upon the ability of Developer as an independent businessman.
Franchisor expressly disclaims the making of, and Developer acknowledges
Developer has not received, any warranty or guarantee, express or implied, as to
the potential volume, profits, or success of the business venture contemplated
by this Agreement.

-15-

<PAGE>

B. Developer acknowledges that Developer received a copy of the New York
Bagel Enterprises, Inc. Development Agreement, the attachments thereto, if any,
and agreements relating thereto, if any at least five business days prior to the
date this Agreement was executed; and that Franchisor has accorded Developer
ample time and opportunity to consult with advisors of Developer's own choosing
about the potential benefits and risks of entering into this Agreement.
Developer further acknowledged that Developer has received a copy of
Franchisor's Uniform Franchise Offering Circular at least ten business days
prior to the date this Agreement was executed.

IN WITNESS WHEREOF, the parties hereto have fully executed, sealed, and
delivered this Agreement to be effective on the date and year executed by
Franchisor below.

ATTEST: NEW YORK BAGEL ENTERPRISES, INC.

By
- --------------------- ------------------------------
Witness Title:
--------------------------
Date:
---------------------------

"Franchisor"

ATTEST:
--------------------------------

By
- --------------------- ------------------------------

- ----
Witness
Title:
--------------------------
Date:
---------------------------

"Developer"

-16-

<PAGE>

GUARANTY

As an inducement to New York Bagel Enterprises, Inc. to enter into the
foregoing Development Agreement, which it is unwilling to do but for this
Guaranty, the undersigned individually and, if more than one Guarantor, jointly
and severally guarantee the payment and performance of all obligations of the
Developer under the Agreement. This shall be an unconditional, irrevocable, and
continuing guaranty for the entire term of this Agreement, including any renewal
terms.

The undersigned agree that they are willing to remain fully bound by this
Guaranty notwithstanding any action or inaction of the Franchisor and Developer
in connection with the Agreement, and that their obligation shall not be
modified, waived, or released by any modification, amendment, or departure from
the terms of the Agreement, or by any forbearance, extension of time, waiver, or
release granted by Franchisor to Developer or any Guarantor or with respect to
any security held by Franchisor. The undersigned expressly waive any notice of
all such matters and agree to pay and perform the obligations of Developer
without notice or demand from the Franchisor and without any requirement that
Franchisor first proceed against Developer or any other Guarantor.

IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty as
of the date of the Development Agreement.

--------------------------------
ATTEST:

- ---------------------

--------------------------------
ATTEST:
"Guarantor"

- ---------------------

-17-

<PAGE>

-18-

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.
DEVELOPMENT AGREEMENT

DEVELOPMENT SCHEDULE

Number of Bakery Restaurants Number of Satellite Restaurants
To be Established To be Established
Date and in Operation and in Operation
- ---- ---------------------------- ------------------------------

- --------- -------------------------- ------------------------------

Attachment "A"

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

DEVELOPMENT AGREEMENT

FRANCHISE AGREEMENT

The form of Franchise Agreement currently offered by Franchisor is
attached.

(Refer to Section III.A. Development Agreement.)

Attachment "B"

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

FRANCHISE AGREEMENT

Exhibit B

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

FRANCHISE AGREEMENT

TABLE OF CONTENTS

Page No.

Article 1 Acknowledgments and Representations. . . . . . . . . . . . . 2
Article 2 Grant of Franchise . . . . . . . . . . . . . . . . . . . . . 3
Article 3 Term and Renewal . . . . . . . . . . . . . . . . . . . . . . 5
Article 4 Fees and Royalties . . . . . . . . . . . . . . . . . . . . . 6
Article 5 Restaurant Construction and Opening. . . . . . . . . . . . . 7
Article 6 Duties of NYBE . . . . . . . . . . . . . . . . . . . . . . . 10
Article 7 Duties of Franchisee . . . . . . . . . . . . . . . . . . . . 12
Article 8 Quality Control and Supervision. . . . . . . . . . . . . . . 16
Article 9 Advertising. . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 10 Financial Reporting. . . . . . . . . . . . . . . . . . . . . 21
Article 11 Proprietary Marks and Trade Secrets; Competition . . . . . . 23
Article 12 Insurance and Indemnity. . . . . . . . . . . . . . . . . . . 27
Article 13 Transfer of Interest . . . . . . . . . . . . . . . . . . . . 29
Article 14 Default and Termination. . . . . . . . . . . . . . . . . . . 34
Article 15 Obligations upon Termination . . . . . . . . . . . . . . . . 36
Article 16 Additional Covenants . . . . . . . . . . . . . . . . . . . . 39
Article 17 Approvals and Waivers. . . . . . . . . . . . . . . . . . . . 40
Article 18 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Article 19 Alternative Dispute Resolution . . . . . . . . . . . . . . . 41
Article 20 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 43
Article 21 Construction and Modification. . . . . . . . . . . . . . . . 44
Article 22 Execution of Agreement . . . . . . . . . . . . . . . . . . . 46
Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Exhibit A (Owners of Franchisee)
Exhibit B (Covenant Agreement)

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT (the "Agreement") made and entered into at
Wichita, Kansas this _____ day of _____________________, 19__, by and between
NEW YORK BAGEL ENTERPRISES, INC. ("NYBE" or "Franchisor"), a Kansas corporation,
having its chief executive offices at 250 N. Water, Wichita, Kansas 67202, and
________________________________________________________ (hereinafter referred
to as "Franchisee"), whose principal business address is____________________
____________________________________.

RECITALS

A. NYBE has developed and owns a distinctive system (hereinafter
"System") for the design, establishment, and operation of restaurants under the
name "New York Bagel Cafe & Deli" (such name, the service mark "Like Bread, With
An Attitude", and any other trade names, service marks, trademarks, logos,
emblems, or other indication of origin as are now or hereafter designated by
NYBE as part of the system are hereinafter referred to as "Proprietary Marks")
utilizing certain Trade Secrets (as hereinafter defined) in connection with the
retail sale of bagels made fresh daily, sandwiches, salads, soups, beverages,
and dessert products.

B. The System has been developed as a uniform method and philosophy of
operation, customer service, marketing, advertising, promotion, publicity, and
technical knowledge relative to the bakery and delicatessen business.
Franchisee recognizes the benefits to be derived from being identified with and
licensed to use the System and understands that it is necessary to prescribe and
maintain the conditions of operation of the franchise so that the public will
come to expect a high measure of excellence and uniform quality from each
franchise for the benefit of NYBE and its franchisees.

C. Franchisee desires a franchise to establish and operate a NEW YORK
BAGEL CAFE & DELI Restaurant ("NYB Restaurant") and NYBE is willing to grant
such a franchise on the terms and conditions hereafter stated.

-1-

<PAGE>

ARTICLE 1. ACKNOWLEDGMENTS AND REPRESENTATIONS.

Franchisee acknowledges and represents to NYBE, in order to induce NYBE to
enter this Agreement, as follows:

A. NYBE makes no representations or warranties and hereby disclaims
any warranties with regard to whether any of the Proprietary Marks are
protectable or registerable and with regard to whether any of the
Proprietary Marks infringe upon the rights of others;

B. Franchisee has read this Agreement and NYBE's Franchise
Disclosure Document and understands and accepts the terms, conditions, and
covenants contained in this Agreement as being reasonably necessary to
maintain NYBE's standards of quality and service and the uniformity of
those standards at each NYB Restaurant in order to protect and preserve the
goodwill of the Proprietary Marks;

C. Franchisee has conducted an independent investigation of the
business contemplated by this Agreement. Franchisee recognizes that the
nature of the business conducted by NYBE may evolve and change over time;
that an investment in a NYB Restaurant involves business risks; and that
the success of the venture depends primarily upon Franchisee's business
ability and efforts;

D. Franchisee has not received or relied upon any guarantee,
expressed or implied, about the revenues, profits, or success of the
business venture contemplated by this Agreement;

E. No representations have been made by NYBE, or by its officers,
directors, shareholders, employees, or agents, that are contrary to the
statements made in the Franchise Disclosure Document heretofore received by
Franchisee or to the terms contained in this Agreement;

F. In all of their dealings with Franchisee, the officers,
directors, employees, and agents of NYBE act only in a representative
capacity, not in an individual capacity, and that this Agreement and all
business dealings between Franchisee and such individuals as a result of
this Agreement are solely between Franchisee and NYBE; and

-2-
<PAGE>

G. The application made by Franchisee to NYBE is true and correct.
Franchisee has made no incorrect statement in the application or failed to
make any statement that would be necessary to make the statements in the
application not misleading.

ARTICLE 2. GRANT OF FRANCHISE.

2.1. Subject to the terms and conditions hereof, and to the continuous
compliance by Franchisee therewith, NYBE hereby grants to Franchisee the right
to operate [check the following as applicable]:

an NYB Restaurant with a bagel bakery (a "Bakery Restaurant"); or
----

an NYB Restaurant without a bagel bakery (a "Satellite Restaurant");
----

and to use the System and the Proprietary Marks in connection therewith. The
Bakery Restaurant or the Satellite Restaurant shall be referred to herein as the
"NYB Restaurant" or "franchised business."

2.2. Franchisee shall operate the NYB Restaurant at, and only at, the
following location: _______________________________________________ (hereinafter
the "Approved Location").

2.3. Franchisee shall not relocate the NYB Restaurant without the prior
written approval of NYBE which approval shall not be unreasonably withheld
provided:

A. The relocation is within the Assigned Territory (as defined in
Section 2.4 hereof) and does not infringe upon the territory of another NYB
Restaurant;

B. Franchisee's lease, if any, for the new location complies with
NYBE's then-current requirements; and

-3-
<PAGE>

C. Franchisee complies with NYBE's then-current requirements for
furnishing the NYB Restaurant at the new location.

Franchisee agrees that the Assigned Territory shall not be modified as a
result of any relocation of the NYB Restaurant.

2.4. Except as otherwise provided in this Agreement, during the term
hereof, NYBE shall not establish, nor franchise another to establish, a NYB
Restaurant within a radius of ___ miles of the Approved Location (hereinafter
the "Assigned Territory"). However, subject to Franchisee's right of first
refusal described in Section 2.5 hereof, NYBE retains the right to acquire
restaurants and/or to acquire a franchisor with franchisees which operate
restaurants (but not to establish restaurants or to franchise another to
establish restaurants) at any location within the Assigned Territory which
operate under proprietary marks other than those used in connection with the
System for the sale of the same, similar, or different products and services, on
any terms and conditions NYBE may deem advisable.

2.5. NYBE shall provide written notice to Franchisee within a reasonable
time upon NYBE's acquisition during the term hereof of any restaurants which
operate under proprietary marks other than those used in connection with the
System for the sale of the same, similar, or different products and services and
which are located in the Assigned Territory (hereinafter, whether one or more,
"Non-System Restaurants"). Such notice shall provide Franchisee with a right of
first refusal to acquire such Non-System Restaurants from NYBE on the terms
provided below if the sale by NYBE of such restaurants to Franchisee is allowed
by applicable law. Subject to the foregoing, Franchisee shall have the right
and option, exercisable within 30 days after receipt of such written
notification, to provide written notice to NYBE that Franchisee desires to
purchase all of the Non-System Restaurants and to convert such restaurants to
NYB Restaurants under the System. In the event Franchisee elects to purchase
and convert the Non-System Restaurants, Franchisee must close on such purchase
and execute NYBE's then-current form of NYBE Franchise Agreement (which shall
require payment of the then-current initial franchise fee) within 60 days from
the date of notice to NYBE of Franchisee's election to purchase and convert.
The purchase price to be paid by Franchisee for the Non-System Restaurants shall
be the cash equivalent of NYBE's restaurant cost for each Non-System
Restaurants, as determined by NYBE in NYBE's sole discretion. In the event
Franchisee does not elect to purchase and convert the Non-System Restaurants as
provided in this Section, Franchisee shall have no further right or option to
acquire such Non-System Restaurants, and NYBE may sell such Non-System
Restaurants to a third party and/or NYBE may continue to

-4-
<PAGE>

operate the Non-System Restaurants under proprietary marks other than those used
in connection with the System.

2.6. The license granted hereby to use the Proprietary Marks is
nonexclusive, and Franchisee acknowledges and agrees that such Proprietary Marks
are and shall remain the property of NYBE and shall not be contested as to
ownership or validity by Franchisee, and that NYBE makes no representations or
warranties and hereby disclaims any warranties with regard to whether any of the
Proprietary Marks are protectable or registerable and with regard to whether any
of the Proprietary Marks infringe upon the rights of others. Franchisee
understands and agrees that the license to use the marks is conditioned upon
Franchisee's agreement that: (i) the Proprietary Marks shall be used only in
connection with the franchised business and only in the manner authorized by
NYBE; (ii) Franchisee will not use the Proprietary Marks as part of its
corporate or other legal name, will identify itself as a franchisee, and will
comply with all fictitious name and other statutes in connection with its use of
the Proprietary Marks; (iii) Franchisee will cooperate with NYBE in protecting
and defending the Proprietary Marks; and (iv) Franchisee will comply with NYBE's
designations of additions, deletions, and changes in the Proprietary Marks.

ARTICLE 3. TERM AND RENEWAL.

3.1. Unless sooner terminated or modified as hereinafter provided, the term
of this Franchise shall be ten years from the date of this Agreement.

3.2. Franchisee is granted the option to renew this Agreement for one
additional consecutive term of ten years, provided Franchisee complies with the
following conditions prior to renewal:

A. Franchisee shall give NYBE written notice of its election to
renew not less than 12 months nor more than 18 months prior to the end of
the initial term;

B. NYBE may inspect the franchised premises at least six months
prior to expiration of the initial term and Franchisee shall complete to
NYBE's satisfaction all maintenance, refurnishing, renovating, and
remodeling of the premises as NYBE shall reasonably require no later than
60 days prior to the end of the initial term;

-5-

<PAGE>

C. Franchisee shall not be in default of any provision of this
Agreement, any amendment hereof, or successor hereto, or any other
agreement between Franchisee and NYBE or any subsidiary or affiliate of
NYBE, and shall have substantially complied with all of the terms and
conditions of such agreements during the terms thereof;

D. Franchisee shall have satisfied all monetary obligations owed by
Franchisee to NYBE and its subsidiaries and affiliates and shall have
timely met those obligations throughout the term of this Agreement;

E. Franchisee shall execute, for the renewal term, NYBE's then-
current form of renewal franchise agreement, which agreement shall supersede
this Agreement in all respects, and the terms of which may differ from the
terms of this Agreement, including, without limitation, higher rates for
continuing fees; provided, however, that Franchisee shall pay, in lieu of an
initial franchise fee, a renewal fee equal to one-half of the initial
franchise fee set forth in Section 4.1;

F. Franchisee shall execute a general release, in a form prescribed
by NYBE, of any and all claims against NYBE, its subsidiaries and
affiliates, and the officers, directors, agents, and employees of NYBE and
each of its subsidiaries and affiliates; provided, however, that all rights
enjoyed by the Franchisee and any causes of action arising in its favor
from the provisions of any applicable franchise laws and regulations shall
remain in force; it being the intent of this proviso that any non-waiver
provisions of such laws be satisfied; and

G. Franchisee's managers and other employees shall comply with
NYBE's then-current qualification and training requirements.

ARTICLE 4. FEES AND ROYALTIES.

4.1. In consideration of the rights and franchise granted herein,
Franchisee shall pay NYBE the following:

A. If the NYB Restaurant is a Bakery Restaurant, as defined in
Section 2.1, a franchise fee of $21,000, and if the NYB Restaurant is a
Satellite Restaurant, as defined in Section 2.1, a franchise fee of
$12,000. Franchisee acknowledges and agrees that such fee has been fully
earned and is nonrefundable

-6-

<PAGE>

in consideration of expenses incurred, rights granted, services rendered,
and other valuable consideration, the receipt and sufficiency of which is
acknowledged by Franchisee.

B. A monthly royalty fee continuing throughout the initial term of
this Agreement in an amount equal to four percent of the Franchisee's gross
receipts.

C. In the event that NYBE later decides to establish a marketing and
advertising fund for the System, and upon Franchisee's receipt of 30 days'
written notice from NYBE announcing such decision, Franchisee shall
thereafter pay to NYBE monthly fees continuing throughout the initial term
of this Agreement in an amount specified by NYBE from time to time, not to
exceed two percent (2%) of Franchisee's monthly gross receipts for use by
the NYBE for advertising and marketing purposes, as set forth in Section
9.3 of this Agreement.

4.2. All monthly payments required by Sections 4.1.B and 4.1.C shall be due
to NYBE by the 15th day after the end of the month in which such gross receipts
were received by Franchisee, and shall be submitted to NYBE together with any
report required under Article 10 hereof. Any payment or report not actually
received by NYBE on or before such date shall be deemed overdue unless
postmarked at least five days prior to the date it was due. If any payment is
overdue, Franchisee shall pay to NYBE immediately upon demand the overdue amount
together with interest on such amount from the date it was due until paid, at
the lesser of one and one-half percent (1.5%) per month, or the maximum rate
permitted by law. Franchisee acknowledges that nothing contained in this
Section shall constitute an agreement by NYBE to accept such payments after the
same are due or a commitment by NYBE to extend credit to, or otherwise finance
Franchisee's operation of, the NYB Restaurant. Franchisee acknowledges that
Franchisee's failure to pay all such amounts when due shall constitute grounds
for termination of this Agreement, as provided in Article 14 of this Agreement,
notwithstanding the provisions of this Section. The foregoing shall be in
addition to any other remedies NYBE may have.

4.3. As used in this Agreement, "gross receipts" shall mean all gross
revenue during each month of every kind or nature related to the NYB Restaurant,
including without limitation all restaurant revenue posted whether it is
collected or remains uncollected, all charges for other products, services, and
facilities and vending machine receipts, but excluding sales taxes or other
taxes collected by Franchisee from customers for transmittal to appropriate
taxing authorities. "Gross receipts" shall be determined in accordance with the
accounting procedures set forth in the Confidential NYBE Manual (the "NYBE
Manual").

-7-

<PAGE>

ARTICLE 5. RESTAURANT CONSTRUCTION AND OPENING.

5.1. Prior to commencing construction of the NYB Restaurant under this
Agreement, Franchisee shall have (i) requested and received written approval of
NYBE of the proposed site for the NYB Restaurant, (ii) provided Franchisor with
blueprints for the proposed site adequate for use by Franchisor in preparing
site layout plans, and (iii) received the site layout plans and specifications
from Franchisor described in Section 6.3 hereof.

5.2. At least 30 days prior to commencing construction of tenant
improvements for the NYB Restaurant (or, where applicable, the building for the
NYB Restaurant) under this Agreement, Franchisee shall have requested and
received approval of NYBE of each of the following:

A. The lease or purchase agreement for the proposed site, which must
not contain any provision that is inconsistent with or interferes with the
performance of any provision of this Agreement (which in the case of leases
will require provisions in the lease or addendum to lease in form and
substance acceptable to NYBE (i) authorizing NYBE to enter the premises and
make any modifications necessary to protect the proprietary marks, (ii)
granting to NYBE the right (but not the duty) to assume the lease if
Franchisee is in default under the terms and provisions of the lease and/or
if this Agreement expires or is terminated, (iii) requiring concurrent
notice from lessor to NYBE of any lease default or termination, and (iv)
providing for a term of at least 10 years including option periods in favor
of Franchisee);

B. Plans and specifications adapted to the proposed site;

C. Satisfactory evidence that all permits, licenses, and
certifications required for the lawful construction and operation of the
proposed NYB Restaurant, including, without limitation, all applicable
building permits, zoning access, sign and fire requirements, have been
obtained;

D. Evidence of insurance naming NYBE as additional insured subject
to the provisions of Section 12.1 of this Agreement; and

E. Such other information as NYBE may reasonably request.

-8-

<PAGE>

5.3. Within 30 days of the submission of the foregoing items, the NYBE will
approve or disapprove and provide written notice of such action, to the
Franchisee.

5.4. NYBE's provision of site layout plans and specifications and its
exercise of its rights to inspect construction of the NYB Restaurant shall be
solely for the purpose of assuring compliance with the terms and conditions of
this Agreement, and NYBE shall have no liability or obligation to Franchisee or
any other person with respect to construction of the NYB Restaurant.

5.5. Franchisee shall order, purchase and/or lease and install all
fixtures, equipment, furnishing, furniture, signs, supplies and other items
necessary for completion and opening of the NYB Restaurant as specified in the
NYBE Manual.

5.6. Franchisee shall diligently and continuously pursue the completion of
the NYB Restaurant premises in accordance with the plans and specifications in
order for the NYB Restaurant to be ready to open for business not later than 90
days after Franchisee receives possession of the NYB Restaurant site.

5.7. The NYB Restaurant shall be opened for business immediately upon
satisfaction of the following requirements:

A. All furnishings, furniture, equipment, signs, supplies and other
items required for the opening of the NYB Restaurant in accordance with the
Agreement and the standards of NYBE shall have been installed, and
Franchisee shall have submitted to NYBE a certificate of occupancy or
equivalent certificate from appropriate regulatory authorities;

B. Franchisee (or a qualified general manager employed by
Franchisee) has completed to NYBE's satisfaction a training program
conducted by NYBE, and Franchisee has employed qualified personnel
sufficient to operate the NYB Restaurant;

C. Franchisee has paid all sums due NYBE, its parent, subsidiaries,
or affiliated companies;

-9-

<PAGE>

D. Franchisee is not in default under any existing franchise
agreement or other agreement with NYBE;

E. Franchisee has certified in writing to NYBE that all terms and
conditions relating to the opening of the NYB Restaurant have been
satisfied and the NYB Restaurant is ready to open for business as a NYB
Restaurant;

F. NYBE shall be satisfied as to Franchisee's compliance with
requirements necessary for opening the NYB Restaurant by such on-site
inspection and investigation as NYBE deems appropriate, which shall be made
and completed within 15 days of receipt of the certificate of Franchisee
pursuant to subsection (E) of this Section; and

G. Franchisee shall conduct a grand opening advertising and
promotional program in accordance with the grand opening advertising and
promotional guidelines set forth in the NYBE Manual during the period
commencing seven days before and ending 90 days after the opening of the
NYB Restaurant and to expend not less than $2,500 on such program.

ARTICLE 6. DUTIES OF NYBE.

In addition to the other obligations and duties set forth in this
Agreement, NYBE agrees as follows:

6.1. NYBE shall provide initial on-site assistance by a NYBE representative
immediately prior to opening and after the commencement of operations, as set
forth in Section 6.5, for an aggregate total of approximately ten days.

6.2. NYBE shall provide a set of then-current prototype plans and
specifications (not for construction) for a typical NYB Restaurant.

6.3. Within 30 days following the later of (i) NYBE's approval of the
proposed site in accordance with Article 5 hereof, or (ii) the delivery by
Franchisee to NYBE of blueprints for the unfinished leased premises for the
Restaurant which are adequate for use in preparing site layout plans, NYBE will
furnish to Franchisee site layout plans and specifications which adapt

-10-

<PAGE>

NYBE's prototype plans and specifications to Franchisee's specific location
based upon the blueprints furnished by Franchisee (Franchisor will not make any
field visits to the proposed Restaurant to verify the information contained in
such blueprints). Franchisee shall be responsible for the preparation of any
necessary "as-built" site plans.

6.4. NYBE shall provide an initial training program for Franchisee or
Franchisee's general manager and the other personnel designated in the NYBE
Manual; provided, however, if Franchisee currently operates one or more
franchised NYB Restaurants in addition to the NYB Restaurant franchised
hereunder, NYBE may elect not to provide initial training to some or all of
Franchisee's personnel if, in NYBE's judgment, such training is not required.
NYBE shall make available such other training programs or seminars as NYBE deems
appropriate. All training provided by NYBE shall be subject to the terms and
conditions set forth in Section 7.2 of this Agreement.

6.5. If the NYB Restaurant franchised hereunder is the first NYB Restaurant
operated by Franchisee under the System, NYBE shall provide Franchisee initial
on-site assistance prior to opening and after the commencement of NYB Restaurant
operations for an aggregate total of approximately ten days. Thereafter, NYBE
shall provide assistance, consultation, and counseling to Franchisee upon
Franchisee's reasonable request and subject to (as to timing) the availability
of personnel. In connection with on-site assistance or consultation other than
initial on-site assistance and other than NYBE-initiated inspections, NYBE may
charge for each of NYBE's personnel involved therewith, a reasonable daily
assistance fee and reasonable expenses for travel and room and board.

6.6. NYBE shall provide Franchisee on loan one copy of the NYBE Manual
setting forth standards of operation for Franchisee's System and standards of
quality, cleanliness, and service for the NYB Restaurant. NYBE shall have the
right to add to and otherwise modify the NYBE Manual from time to time to
reflect changes in the business, authorized products or services (or
specifications therefor), equipment requirements, quality standards, and
operating procedures of the NYB Restaurant as determined by NYBE from time to
time.

6.7. Franchisee acknowledges and agrees that NYBE may establish, maintain
and administer a Marketing and Advertising Fund for the System subject to the
provisions of Article 9 of this Agreement. NYBE shall review all other
advertising materials which Franchisee proposes to use in accordance with the
procedures prescribed in Section 9.1 hereof.

-11-

<PAGE>

6.8. NYBE will seek to maintain the high standards of quality, cleanliness,
appearance, and service of the System, and to that end shall conduct, as it
deems advisable, inspections of the NYB Restaurant and evaluations of the
services rendered therein, and interviews of Franchisee's employees, agents, and
customers.

6.9. Franchisee acknowledges and agrees that any duty or obligation imposed
on NYBE by this Agreement may be performed by a designee, employee, or agent of
NYBE, as NYBE may direct.

ARTICLE 7. DUTIES OF FRANCHISEE.

In addition to the other obligations and duties set forth in this
Agreement, Franchisee agrees as follows:

7.1. Franchisee covenants and agrees to commence, diligently pursue, and
complete construction of the NYB Restaurant and open for business in accordance
with Article 5 hereof.

7.2. Franchisee shall serve as general manager or shall employ a qualified
general manager whose responsibilities shall include those prescribed in the
NYBE Manual and the Franchisee shall also employ such other personnel as NYBE
may reasonably specify from time to time in the NYBE Manual. Franchisee or
Franchisee's general manager and the other personnel employed by Franchisee in
the positions designated in the NYBE Manual shall, prior to assuming their
positions, attend and complete to NYBE's reasonable satisfaction the initial
training program conducted by NYBE at such time and place and for such duration
as NYBE may prescribe. NYBE shall provide, with respect to the initial training
of those personnel, training instructors, facilities, and training materials.
All other expenses, including, without limitation, the expenses of Franchisee's
employees for travel, room, board, and wages, shall be borne by Franchisee.
Each person subsequently employed by Franchisee to fill a position for which
initial training is required by NYBE must also satisfactorily complete an
adequate training program satisfactory to NYBE prior to assuming that position;
provided that, if a new general manager is hired in an emergency situation
without having an opportunity to complete the training course, NYBE may give
written permission for such person to attend a training course within 60 days of
employment with the Franchisee. Franchisee shall pay to NYBE a training fee at
the then-current rate imposed by NYBE for the initial training of any
replacement personnel and for such other

-12-

<PAGE>

training programs as NYBE may require or offer as optional training for
Franchisee's employees, which fee shall be in addition to any other training
costs to be borne by Franchisee as provided herein.

7.3. Franchisee expressly acknowledges that adherence to each and every
provision of the System is reasonable, necessary, and essential to maintain the
uniform image and favorable reputation of each NYB Restaurant and the success of
NYBE's franchise program. Accordingly, Franchisee expressly agrees to comply
with each and every requirement of the System during the term hereof, as the
same may be modified or changed from time to time by NYBE in its sole
discretion. Franchisee shall operate the franchised business strictly in
conformity with such standards, techniques, and procedures as NYBE may from time
to time prescribe in the NYBE Manual or otherwise in writing, and shall refrain
from deviating therefrom without NYBE's prior written consent. Franchisee shall
not operate the franchised business in any manner which reflects adversely on
the System, the Proprietary Marks, the goodwill associated therewith or NYBE's
rights therein.

7.4. If the NYB Restaurant is a Satellite Restaurant, Franchisee shall not
bake bagels of any kind at the NYB Restaurant. Franchisee shall use the NYB
Restaurant premises solely for the operation of the franchised business and
shall not use or allow the use of the premises for any other purpose or activity
at any time without the prior written consent of NYBE, which may be granted or
withheld in NYBE's sole discretion.

7.5. The NYB Restaurant and everything located on the NYB Restaurant
premises shall be maintained in first class condition and repair and shall be
kept neat, clean, and sanitary in accordance with NYBE's standards as specified
in the NYBE Manual, and consistent with the image of a NYB Restaurant as a
clean, sanitary, attractive, and efficiently operated store offering high
quality food and beverages and courteous service. The NYB Restaurant shall be
constructed, maintained, and operated in compliance with all applicable fire,
safety, health, and sanitation laws, ordinances, and regulations. Franchisee
shall place or display at the NYB Restaurant (interior or exterior) only such
signs, emblems, lettering, logos and display only such advertising that
materials are from time to time approved in writing by NYBE. Franchisee shall
not install or have installed any vending machines, video games or similar
devices without the prior written approval of NYBE.

-13-

<PAGE>

7.6. Franchisee shall perform such maintenance of the NYB Restaurant and
the Approved Location as is required by NYBE from time to time to maintain such
condition, appearance, and efficient operation, including, without limitation:

A. Continuous and thorough cleaning and sanitation of the interior
and exterior of the NYB Restaurant;

B. Interior and exterior repair of the NYB Restaurant;

C. Maintenance of equipment at peak performance;

D. Replacement of worn out or obsolete improvements, fixtures,
furnishings, equipment and signs with approved improvements, fixtures,
furnishings, equipment and signs; and

E. Periodic painting and decorating.

At NYBE's request, which shall not be more often than once every five
years, Franchisee shall upgrade the NYB Restaurant at Franchisee's expense to
conform to the building decor and trade dress consistent with NYBE's then-
current public image, including, without limitation, such structural changes,
remodeling, and redecoration and such modifications to existing improvements as
may be deemed necessary by NYBE. Except as described above, Franchisee shall
make no additions, alterations, or replacements to the NYB Restaurant or
anything located on the NYB Restaurant premises without the prior written
consent of NYBE.

7.7. Franchisee shall acquire and maintain at its cost a computerized cash
register meeting NYBE's specifications. If requested by NYBE, Franchisee will
acquire and maintain at its cost computer equipment and software meeting NYBE's
specifications which may be connected with NYBE's computer equipment via normal
telephone lines, and which may be used to transmit data and other information
electronically between NYBE or its designee and Franchisee.

7.8. Franchisee shall, at Franchisee's expense, comply with all federal,
state, and local laws, rules, and regulations, and shall timely obtain, and keep
in force as required throughout the term of this Agreement, any and all permits,
certificates, licenses, and approvals necessary for the full and proper conduct
of the business franchised hereunder.

-14-

<PAGE>

7.9. Franchisee shall notify NYBE in writing within five days of the
commencement of any action, suit, or proceeding, and of the issuance of any
inquiry, subpoena, order, writ, injunction, award, or decree of any court,
agency, or other governmental instrumentality, arising out of, concerning, or
which may affect the operation or financial condition of the franchised
business, including, without limitation, any criminal action or proceeding
brought by Franchisee against employees, customers, or other persons.

7.10. Franchisee shall pay when due all taxes levied or assessed in
connection with the possession, ownership, or operation of the NYB Restaurant
and all taxes payable on royalties and other payments made to NYBE or to any of
its affiliates (excluding income taxes payable by NYBE). In the event of any
BONA FIDE dispute respecting any tax assessed against Franchisee, the NYB
Restaurant, any personal property located therein, or any payments due to NYBE,
Franchisee may contest the validity or amount of the tax in accordance with
procedures of the taxing authority; provided, however, that Franchisee shall act
with all due diligence and shall in no event permit a tax sale or seizure
against the NYB Restaurant or any equipment, goods, or property located therein,
or any impoundment of payments due to NYBE.

7.11. If the Franchisee is at any time a corporation, limited liability
company, or partnership, Franchisee agrees and represents that:

A. Franchisee has the authority to execute and deliver this
Agreement and to perform its obligations thereunder and is duly organized
or formed and validly existing in good standing under the laws of the state
of its formation or organization;

B. Franchisee's organizational documents or partnership agreement
will recite that the issuance and transfer of the ownership interests of
Franchisee are restricted by the terms and conditions of this Agreement,
and all certificates and other documents representing an ownership interest
in Franchisee will bear a legend referring to the restrictions of this
Agreement;

C. Exhibit A to this Agreement will completely and accurately
describe all of the owners of Franchisee and their interests in Franchisee;
and

D. Each of the owners of Franchisee at any time during the term of
this Agreement will sign an agreement in the form that NYBE prescribes
undertaking to be bound jointly and severally by all provisions of this
Agreement and any ancillary agreements between NYBE or its affiliates and
Franchisee, and a material

- 15 -

<PAGE>

breach of such agreement shall be deemed a material breach of this
Agreement. Franchisee and its owners agree to sign and deliver to NYBE
such revised Exhibits A as may be necessary to reflect any changes in the
information contained therein and to furnish such other information about
Franchisee's organization or formation as NYBE may request.

E. Franchisee shall furnish NYBE with its articles or certificate of
incorporation, bylaws, and partnership or limited liability documentation
or similar organization documents, and any other documents NYBE may
reasonably request, and any amendments thereto.

F. Franchisee shall confine its activities, and shall at all times
provide that its activities are confined, exclusively to operating the
franchised business.

ARTICLE 8. QUALITY CONTROL AND SUPERVISION.

8.1. Franchisee agrees that substantial uniformity of quality at all NYB
Restaurants is necessary and desirable for purposes of establishing and
protecting the shared identity, reputation, and goodwill associated therewith.
In order to better accomplish these objectives, Franchisee agrees that:

A. The NYB Restaurant shall offer for sale only the products and
services, and shall only purchase, lease, install, and use the types
and/or brands of food products, beverages, ingredients, flavorings, and
garnishes used to prepare food products, cartons, bags, boxes, napkins,
other containers, paper and plastic goods, packaging supplies, equipment,
fixtures, furnishings, concept, supply, building design or layout, color
schemes, concepts, and other items or services specified in this Agreement
and the NYBE Manual, or approved in writing by NYBE as being consistent
with NYBE's standards and specifications and with the System.

B. NYBE may from time to time designate approved suppliers of
products and services, which may include NYBE. If Franchisee (i) desires
to purchase or lease products or services from sources not previously
approved in writing by NYBE for such items, or (ii) proposes to sell any
food product or beverage or use any ingredients, flavorings, garnishes, or
containers, cartons, bags, boxes, paper or plastic goods, packaging
supplies or other materials, of a type not previously approved by NYBE,
Franchisee shall submit to NYBE a

- 16 -

<PAGE>

written request for approval and provide to NYBE such information and
specifications as NYBE requests. NYBE may require, as a condition of its
approval, that samples of the item be submitted to NYBE for inspection and
testing, and Franchisee or the proposed source shall pay the reasonable
expenses of such inspection and testing. NYBE may also require submission
of evidence that the proposed source carries insurance sufficient to
reasonably protect NYBE and Franchisee from liability arising out of the
use or sale of the product or service. Provided that the foregoing
conditions are satisfied, and the products or services meet NYBE's
standards and specifications and are consistent with the System, NYBE's
approval will not be unreasonably withheld.

C. Franchisee agrees that it shall purchase and offer for sale all
products which NYBE may uniformly designate for all System franchisees to
purchase and offer for sale in accordance with the NYBE Manual.

8.2. Franchisee shall only make sales over-the-counter at retail to the
ultimate consumer of the products to be offered for sale by the NYB Restaurant.

8.3. The franchised business shall be conducted in accordance with the NYBE
Manual, as updated, supplemented, and modified from time to time, receipt of one
current copy of which is hereby acknowledged. Franchisee further acknowledges
that establishing, maintaining, and protecting the good will, reputation, and
uniformity of the System requires strict adherence to this Agreement and the
NYBE Manual in all respects, it being agreed that every detail is significant
and material.

8.4. Franchisee hereby grants to NYBE and its agents the right to enter
upon the premises of the NYB Restaurant at any reasonable time for the purpose
of conducting inspections. Franchisee agrees to take such steps as may be
reasonably necessary to correct any deficiencies detected during such an
inspection, upon the written request of NYBE or its agents, within such
reasonable time as may be specified therein.

8.5. If Franchisee develops any products, services, procedures, or
inventions deemed by NYBE to be appropriate for use in other System NYB
Restaurants, it is understood and agreed that NYBE may use such products,
services, procedures, or inventions in other System NYB Restaurants without
obligation to compensate Franchisee, it being understood and agreed

- 17 -

<PAGE>

that the benefit to the Franchisee from the overall enhancement of the System is
sufficient consideration for granting this right to NYBE.

8.6. All marketing and promotion by Franchisee shall be factual, ethical,
and in good taste in the judgment of NYBE and shall be subject to NYBE's
approval as provided in Section 9.1. Franchisee shall in all dealings with its
customers, suppliers, NYBE, and the public adhere to the highest standards of
honesty, integrity, fair dealing, and ethical conduct. Franchisee agrees to
refrain from any business or advertising practice which, in the subjective
opinion of NYBE, may be injurious to the business of NYBE and the goodwill
associated with the Proprietary Marks and other NYB Restaurants.

8.7. Within seven days of the receipt by Franchisee of any report from any
health department or other comparable agency, Franchisee shall mail a complete
copy of such report to NYBE. Franchisee shall notify NYBE in writing within
five days of the commencement of any action, suit, or proceeding, and of the
issuance of any order, writ, injunction, award or decree of any court, agency,
or other governmental instrumentality, which may adversely affect the operation
or financial condition of Franchisee or the NYB Restaurant or of any notice of
violation of any law, ordinance, or regulation relating to health or sanitation.

8.8. NYBE may from time to time suggest prices for the goods and services
offered by Franchisee. NYBE and Franchisee agree that the prices suggested by
NYBE are recommendations only and are not mandatory. Nothing contained in this
Agreement shall be deemed a representation or warranty by NYBE that the use of
NYBE's suggested prices shall produce, increase, or optimize profits.

ARTICLE 9. ADVERTISING.

Franchisee and NYBE recognize the value of advertising and the importance
of the standardization of advertising programs to the furtherance of the
goodwill and public image of the System. In order to better accomplish these
objectives, the parties agree as follows:

9.1. Franchisee agrees to spend a minimum of four percent (4%) of gross
receipts per year for media advertising and promotional materials, contributions
to a Marketing Fund pursuant to Section 9.3, and contributions to local or
regional advertising cooperatives

- 18 -

<PAGE>

pursuant to Section 9.4. All advertising by Franchisee in any medium shall be
conducted in such manner, and shall conform to such standards and requirements,
as NYBE may specify. Franchisee shall submit to NYBE (by mail, return receipt
requested), for its prior written approval (except with respect to prices to be
charged), samples of all advertising and promotional plans and materials and all
other materials displaying the Proprietary Marks that Franchisee desires to use
which have not been prepared or previously approved by NYBE. If written
disapproval thereof is not received by Franchisee within 15 days from the date
of receipt by NYBE of such plans and materials, NYBE shall be deemed to have
given the required approval.

9.2. Franchisee shall obtain listings at Franchisee's expense in the yellow
and white pages of local telephone directories. Franchisee shall also pay its
share of the cost of any multiple-NYB Restaurant local telephone book
advertising, to be apportioned equally among all NYB Restaurants listed in such
advertising. All expenditures made by Franchisee pursuant to this paragraph
shall be considered a portion of the minimum required advertising expenditure
set forth in Section 9.1.

9.3. NYBE may later decide to establish and administer a Marketing and
Advertising Fund ("Marketing Fund"), which, if established, would be used by
NYBE to meet any and all costs of developing and preparing national, regional,
point of sale, and local advertising materials for use within the System,
including, without limitation, costs associated with developing, preparing,
directing, administering, maintaining, and disseminating advertising, marketing,
promotional, and public relations materials; conducting marketing research;
maintaining a sales and marketing staff and related expenses; and preparing,
producing, broadcasting, and disseminating advertising and promotions,
including, without limitation, radio, television, newspaper, and magazine
advertising, market surveys, public relations activities, and employment of
advertising agencies. If the Marketing Fund is established, NYBE shall choose
and determine, in its sole discretion, the nature, theme, and timing of
advertising and the kind and quality of advertising materials to be provided to
franchisees through the Marketing Fund. All payments, plus income earned
therefrom, would be used exclusively for the above-stated purposes, would be
maintained in an account separate from NYBE's other funds, and would not be used
to defray any of NYBE's other expenses. If the Marketing Fund is established,
NYBE shall, for each of its company-owned NYB Restaurants, make contributions to
the Marketing Fund at the same percentage of gross receipts required of
franchisees within the System. If the Marketing Fund is established, NYBE or
its designee would direct all advertising and promotional programs and
activities, with sole discretion over the concepts, materials, and media used in
such programs and activities and the placement and allocation thereof.
Franchisee acknowledges that the intent of the Marketing Fund, if established,
would be to maximize general public recognition and acceptance of the
Proprietary Marks for the benefit of the System, and NYBE or its designee

- 19 -

<PAGE>

would have no obligation, in administering the Marketing Fund, to make
expenditures for Franchisee which are equivalent or proportionate to any
payments by Franchisee or to ensure that any particular franchisee or any
particular franchised location benefits directly or PRO RATA from advertising or
promotion conducted under the Marketing Fund.

9.4. NYBE shall have the right, in its sole discretion, to designate
geographic areas for purposes of establishing local or regional advertising
cooperatives ("Cooperatives"). If the NYB Restaurant is within the territory of
an existing Cooperative at the time the NYB Restaurant opens for business,
Franchisee shall immediately become a member of the Cooperative. If a
Cooperative applicable to the NYB Restaurant is established during the term of
this Agreement, Franchisee shall become a member no later than 30 days after the
date approved by NYBE for the Cooperative to commence operation. NYBE or its
affiliates shall participate in any Cooperatives established for geographic
regions that include NYB Restaurants owned by NYBE or its affiliates. The
following provisions shall apply to each Cooperative:

A. Each Cooperative shall be organized and governed in a form and
manner, and shall commence operations on a date, approved in advance by
NYBE in writing. No changes in the bylaws or other governing documents of
a Cooperative shall be made without NYBE's prior written consent.

B. Each Cooperative shall be organized for the exclusive purpose of
administering local and regional advertising programs and developing,
subject to NYBE's approval, promotional materials for use by the members in
local advertising.

C. No advertising or promotional plans or materials may be used by a
Cooperative or furnished to its members without prior approval of NYBE
pursuant to Section 9.4.E below.

D. Franchisee and each member of the Cooperative shall contribute to
the Cooperative, commencing on the 15th day of the first month after the
Cooperative commences operations, the amount determined by the membership.
Said amount shall not exceed two percent (2%) of Franchisee's gross
receipts. Franchisee's obligation to make local advertising expenditures
under Section 9.1 above shall be reduced by the amount of Franchisee's
contributions to the Cooperative. Each required contribution shall be
based on gross receipts for the immediately preceding month, and shall be
submitted together with such statements or reports as may be required by
NYBE, or by the Cooperative with NYBE's prior written approval.

- 20 -

<PAGE>

E. All advertising and promotion by Cooperatives shall be in such
media and of such type and format as NYBE may approve and shall conform to
such standards and requirements as NYBE may specify. The Cooperative shall
submit to NYBE (by mail, return receipt requested), for its prior written
approval (except with respect to prices to be charged), samples of all
advertising and promotional plans and materials and all other materials
displaying the Proprietary Marks that the Cooperative desires to use which
have not been prepared or previously approved by NYBE. If written
disapproval thereof is not received by the Cooperative within 15 days from
the date of receipt by NYBE of such plans and materials, NYBE shall be
deemed to have given the required approval.

F. Upon the designation of geographic areas for Cooperatives, NYBE
shall have the right, in its sole discretion, to require the prospective
members of any Cooperative to take all necessary action to form the
Cooperative. NYBE shall also have the right, in its sole discretion, to
require the members of any Cooperative to cause any Cooperative to: (i)
change the bylaws or other governing documents of the Cooperative; (ii) to
dissolve the Cooperative; and (iii) merge with another Cooperative. NYBE
shall also have the right to redesignate geographic areas for any
Cooperatives and in connection with such redesignation to require the
members of any Cooperative to cause the Cooperative to take any of the
actions set forth above in this Section 9.4.F.

ARTICLE 10. FINANCIAL REPORTING.

10.1. Franchisee shall keep complete records of the franchised business
and the sale of all goods and services therein at the NYB Restaurant.
Franchisee shall record all sales at the NYB Restaurant in a cash register
meeting NYBE's specifications. Franchisee shall retain at the NYB Restaurant for
a period of at least 24 months, all sales and purchase records (including daily
cash register tapes and vendor invoices), books of account, business and payroll
records and vendor financial information relating to the franchised business,
any corporation, partnership or other business association owning the franchise.

10.2. On a weekly basis during the term hereof, Franchisee shall supply
NYBE, at NYBE's request, with a telephonic report of all sales of goods and
services at the NYB Restaurant during the preceding calendar week and, if
available, information respecting the comparable period during the preceding
year. On or before the 15th day of each month, Franchisee shall furnish NYBE
with a written sales report and statement of Gross Revenues in the

- 21 -

<PAGE>

format prescribed by NYBE for all sales made and services provided during the
preceding month. Franchisee shall also submit to NYBE (i) within 30 days
following the month for which such statement is compiled, a monthly profit and
loss statement and a cumulative profit and loss statement from the beginning of
Franchisee's fiscal year to the end of such month, together with such other
financial, operating, marketing, and other information as NYBE may require, and
(ii) within 30 days after each fiscal quarter of Franchisee, an unaudited
quarterly balance sheet. On or before March 31 of each calendar year,
Franchisee shall submit to NYBE a profit and loss statement, a balance sheet,
and a statement of Gross Revenues reflecting Gross Revenues and the results of
operations for the preceding calendar year. All such profit and loss statements
and balance sheets shall comply with any format prescribed by NYBE, shall be
prepared in accordance with generally accepted accounting principles
consistently applied and shall be signed and verified as true and correct by
Franchisee or, if Franchisee is a corporation, partnership, or other business
association, by its duly authorized chief financial officer. In addition, at
NYBE's request, Franchisee shall submit to NYBE true copies of all state sales
tax returns relating to sales made at the NYB Restaurant licensed herein at the
same time the returns are filed with state authorities, and such other records
as NYBE may reasonably request from time to time, including, without limitation,
state and federal income tax returns of Franchisee.

10.3. NYBE or its representatives, at NYBE's expense, shall at all
reasonable times have the right to inspect or audit the books, accounts, records
and returns of Franchisee or of any corporation, partnership or other business
association which owns the Franchise. The foregoing records may include, but
are not limited to, state and federal income tax returns, credit card or any
other third party charge account statements, and any bank, savings and loan, or
financial checking money market, or savings account used for the franchised
business. Franchisee shall fully cooperate with NYBE and its representatives or
agents conducting such inspections or audits and, upon request, Franchisee shall
submit a written response to any issues raised in connection with said audits.
In the event a discrepancy between reported Gross Revenues and actual Gross
Revenues is uncovered in any audit conducted pursuant to this Section for any
reporting period (weekly, monthly or annual), Franchisee shall promptly pay the
amount determined to be owing and, if the discrepancy exceeds two percent (2%)
of reported Gross Revenues, Franchisee shall reimburse NYBE for all costs of the
audit, including travel, lodging, and wages of personnel of NYBE or third
parties required to conduct such audit. Franchisee shall also promptly
reimburse NYBE for the cost of any audit (including salaries, travel, and living
expenses) necessitated by Franchisee's failure to file any financial report due
hereunder and any deficiency in royalties or advertising contributions disclosed
by such audit. At NYBE's option, Franchisee shall also immediately pay to NYBE
interest on the understated amount due from the date such amount was due until
paid at the lesser of one and one-half percent (1-1/2%) per month or the maximum
rate permitted by applicable law. In addition, NYBE shall have the right to
require Franchisee to provide for each subsequent fiscal year, within 120 days
after the end of

- 22 -

<PAGE>

each year, audited financial statements certified by independent certified
public accountants selected by Franchisee and approved by NYBE. The foregoing
remedies shall be in addition to any other remedies NYBE may have. Submission
by Franchisee of more than two written statements of Gross Revenues which under-
report Gross Revenues for any reporting period by two percent (2%) or more
(regardless of any subsequent cure) shall constitute a material breach of this
Agreement entitling NYBE, at its option, the right to terminate this Agreement
pursuant to Section 14.1.C.

10.4. Franchisee hereby authorizes all banks and/or other financial
institutions with which Franchisee does business to disclose to NYBE any
requested financial information in their possession relating to the NYB
Restaurant licensed herein, and hereby authorizes NYBE to release to
Franchisee's lenders or prospective lenders, financial and operational
information relating to the NYB Restaurant licensed herein. Franchisee further
authorizes NYBE to disclose such information to prospective Franchisees and
state regulatory agencies, provided that such information is not identified as
relating to Franchisee's NYB Restaurant unless required by law or regulation and
then only if NYBE requests that such identification be held in confidence.

ARTICLE 11. PROPRIETARY MARKS AND TRADE SECRETS; COMPETITION.

11.1. Franchisee acknowledges that ownership of all right, title, and
interest in the System, the Proprietary Marks, and in the design, decor, and
image of all NYB Restaurant restaurants is and shall remain vested solely in
NYBE. Franchisee expressly disclaims any right, title, or interest therein or
in any goodwill derived therefrom. Franchisee's license to use the Proprietary
Marks is personal to Franchisee, and Franchisee shall not license, sublicense,
or allow the Proprietary Marks to be used by any other person, firm, or business
association without NYBE's prior written approval. All uses of the Proprietary
Marks by Franchisee inure to the benefit of NYBE.

11.2. Franchisee shall not, directly or indirectly, at any time during
the term of this Agreement or thereafter, do, cause or suffer to be done any act
or thing disputing, attacking or in any way impairing or tending to impair the
right, title, or interest of NYBE in the Proprietary Marks or the System.
Franchisee shall immediately notify NYBE in writing of all infringements or
imitations of the Proprietary Marks, and NYBE shall exercise absolute discretion
in deciding what action, if any, should be taken. Franchisee shall fully
cooperate with NYBE in the prosecution of any action to prevent the
infringement, imitation, or illegal use of the Proprietary Marks and agrees to
be named as a party in any such action at NYBE's request.

- 23 -

<PAGE>

NYBE shall bear any and all legal expenses incident to Franchisee's
participation, at NYBE's request, in any action to prevent the infringement or
illegal use of the Proprietary Marks, except for the cost of any legal counsel
separately retained by Franchisee. Except as expressed in this Section, NYBE
shall not be liable to Franchisee for any damages, costs, expenses, loss of
profits or business opportunities, or incidental or consequential damages of any
kind or nature whatsoever relating to any action involving the Proprietary
Marks.

11.3. Franchisee shall use the Proprietary Marks as the sole
identification of the NYB Restaurant; provided, however, that in all public
records and in his relationship with other persons, on stationery, business
forms, checks, or as otherwise required by NYBE, Franchisee shall indicate
Franchisee's independent ownership of the NYB Restaurant. In no event shall
Franchisee use the Proprietary Marks in connection with the sale of any product
or service not authorized for sale at the NYB Restaurant. The Franchisee shall
not license, sublicense, or allow the Proprietary Marks to be used by any other
person or business entity without NYBE's prior written approval. In adopting
any corporate, proprietorship, or partnership name, Franchisee shall not use the
Proprietary Marks or any variation or abbreviation thereof, or any words
confusingly similar thereto. Franchisee has no right to register any of the
Proprietary Marks. If it becomes advisable at any time in NYBE's sole
discretion for NYBE and/or Franchisee to modify or discontinue use of the
Proprietary Marks, and/or use one or more additional or substitute trade or
service Proprietary Marks, Franchisee agrees to comply therewith within a
reasonable time after written notice thereof by NYBE.

11.4. Franchisee further acknowledges and agrees as follows:

A. NYBE possesses certain confidential information consisting of
secret recipes, methods of preparation, and service of food products sold
at NYB Restaurants, knowledge of sales and profit performance at any one or
more NYB Restaurants, knowledge of test programs, concepts or results
relating to new menu items, and advertising and promotional programs,
sources of food products and suppliers of equipment, advertising, promotion
and marketing techniques, the selection and training of store managers and,
in general, methods, techniques, formulas, formats, specifications,
procedures, information systems and knowledge, in the operation and
franchising of NYB Restaurants. All of the foregoing are hereinafter
referred to as the "Trade Secrets".

B. NYBE will disclose the Trade Secrets to Franchisee in furnishing
Franchisee with standard plans for the NYB Restaurant, in the NYBE Manual
and any temporary operating manuals, by providing training to Franchisee
hereunder,

- 24 -

<PAGE>

and in the performance of the NYBE's other obligations and the exercise of
its other rights under this Agreement. Franchisee hereby agrees that all
materials lent or otherwise made available to Franchisee by NYBE and all
disclosures made to Franchisee hereunder including, without limitation, the
NYBE Manual and other confidential commercial information identified as
such by NYBE are trade secrets of NYBE and shall be kept confidential and
used by Franchisee only in the operation of the NYB Restaurant. Franchisee
will not, nor permit anyone else to, reproduce, copy, or exhibit any
portion of the NYBE Manual or any other confidential or proprietary
information received from NYBE. Franchisee shall not divulge any such
Trade Secrets to any person other than Franchisee's employees and then only
to the extent necessary for the operation of the NYB Restaurant.

C. Franchisee shall acquire no interest in the Trade Secrets, other
than the right to utilize them in the development and operation of the NYB
Restaurant during the term of this Agreement. The use or duplication of
the Trade Secrets in any other business will constitute an unfair method of
competition. The Trade Secrets are proprietary and are disclosed to
Franchisee in confidence and solely on the condition that Franchisee
agrees, and Franchisee hereby agrees that Franchisee (i) will not use the
Trade Secrets in any other business or capacity; (ii) will maintain the
absolute confidentiality of the Trade Secrets during and after the term of
this Agreement; (iii) will not make unauthorized copies of any portions of
the Trade Secrets disclosed in written form, including, without limitation,
any plans, the NYBE Manual, bulletins or supplements and additions thereto;
and (iv) will operate and implement all reasonable procedures prescribed
from time to time by NYBE to prevent the unauthorized use and disclosure of
the Trade Secrets. Franchisee shall immediately notify NYBE of any
unauthorized use of disclosure of the NYBE Manual or any of the Trade
Secrets or if the NYBE Manual or any other manuals or materials containing
any Trade Secrets are lost or stolen.

D. The foregoing restrictions on Franchisee's disclosure and use of
Trade Secrets shall not apply to information, processes, or techniques that
are or become generally known and used by other similar restaurants, other
than through disclosure (whether deliberate or inadvertent) by Franchisee,
and disclosure of Trade Secrets in judicial or administrative proceedings
to the extent that Franchisee is legally compelled to disclose such
information, provided, Franchisee shall have used his best efforts, and
shall have afforded NYBE the opportunity, to obtain an appropriate
protective order or other assurance satisfactory to NYBE of confidential
treatment for the information required to be so disclosed.

- 25 -

<PAGE>

11.5. During the term hereof Franchisee shall not compete, or be
associated, directly or indirectly as an owner, officer, director, employee,
consultant, or otherwise, in any business in competition with the System, and,
for a period of two years after any transfer or termination of this Agreement
for any reason, Franchisee shall not compete, or be associated, directly or
indirectly as an owner, officer, director, employee, consultant, or otherwise,
in any business in competition with the System which is located within (i) the
Assigned Territory, (ii) the Designated Market Area or Areas identified by the
then-current Nielsen Wall Map published by the A.C. Nielson Company ("DMA"), in
which the Assigned Territory is located, or (iii) the DMA of any other NYB
Restaurant then existing; provided, however, that passive ownership of less than
five percent (5%) of the outstanding voting securities of a publicly held
corporation (which for purposes of this Agreement means a corporation registered
under the Securities Exchange Act of 1934) shall not be deemed a violation of
this Section. In the event the A.C. Nielson Company discontinues the
publication of Nielson Wall Maps for any reason, NYBE shall have the right to
designate an alternate generally recognized market identification resource for
use in connection with this Section.

11.6. Unless the context otherwise requires, the term "Franchisee"
as used in this Article shall include, individually and collectively, all
partners, officers, directors, managers, members, and holders, directly or
indirectly (and any partners, officers, or directors of any such holder), of any
beneficial interest in the franchise granted hereunder, and any immediate family
members of any of such persons.

11.7. At NYBE's request, Franchisee shall require and obtain
execution of a covenant agreement in the form substantially similar to that
attached hereto as Exhibit B, except for reasonable changes as may be necessary
to comply with applicable law, from time to time (including a covenant agreement
applicable upon the termination of a person's relationship with Franchisee) from
any or all of the following persons: (i) all officers, directors, and holders
of a beneficial interest of five percent (5%) or more of the securities of
Franchisee, and of any corporation directly or indirectly controlling
Franchisee, if Franchisee is a corporation; (ii) the general partners and any
limited partners (including any corporation or other entity, and the officers,
directors, and holders of a beneficial interest of five percent (5%) or more of
the securities of any corporation or other entity which controls, directly or
indirectly, any general or limited partner), if Franchisee is a partnership; and
(iii) the managers and members (including any corporation or other entity, and
the officers, directors, and holders of a beneficial interest of five percent
(5%) or more of the securities of any corporation or other entity which
controls, directly or indirectly, any member or manager), if Franchisee is a
limited liability company. Failure by Franchisee to obtain execution of the
covenant agreement required by this Section, or to deliver such covenant
agreement to NYBE, shall constitute a material breach of this Agreement.

- 26 -

<PAGE>

11.8. Franchisee shall require every person employed as general
manager of the NYB Restaurant to devote full time to such employment and to
agree to be bound by the restrictions set forth in this Article 11. Franchisee
shall also take all reasonable steps to require other employees to be bound by
the confidentiality provisions of this Article 11, and, if requested by NYBE, to
be bound by the noncompetition provisions hereof. Upon NYBE's request,
Franchisee shall promptly provide copies of all such agreements to NYBE.

11.9. Franchisee shall not employ or seek to employ any person who
is or was within the immediate past six months employed by NYBE or any other
System franchisee or induce or seek to induce any such person to leave his or
her employment without the consent of such employee's current employer. NYBE
shall not employ or seek to employ any person who is or was within the immediate
past six months employed by Franchisee or induce or seek to induce any such
person to leave his or her employment. Any party violating the provisions of
this Section shall pay to the former employer as liquidated damages (which the
parties agree are difficult of ascertainment) an amount equal to two times the
annual salary of the employee involved, plus all costs and attorneys fees
incurred by the former employer in connection with such default. The parties
hereto agree that each current and future franchisee in the System shall be a
third party beneficiary of the provisions of this Section, and shall be entitled
to enforce the provisions hereof. NYBE shall have no obligation to enforce the
provisions of this Section for the benefit of any current or future franchisee
in the System.

11.10. In the event any provision of this Article 11 is deemed by a
court of competent jurisdiction to be more restrictive than permissible at law
or equity, then Franchisee agrees that the provisions hereof may be reformed and
modified and enforced by such court to the maximum extent permissible under
applicable law and principles of equity. Franchisee agrees that specific
performance and injunctive relief are necessary and appropriate remedies for
violations of this Article and agrees to the enforcement of such remedies, but
without prejudice to the right of NYBE to recover money damages, which are in no
event a full and adequate remedy for such violations.

ARTICLE 12. INSURANCE AND INDEMNITY.

12.1. Franchisee shall procure, prior to the commencement of any
operations under this Agreement, and maintain in full force and effect during
the term of this Agreement,

- 27 -

<PAGE>

at Franchisee's expense, in form and with insurers having a Best's rating of "A"
or better, and in compliance with the terms of any mortgage or lease covering
the NYB Restaurant premises:

A. Fire, vandalism, and extended coverage insurance for the
full replacement value of the NYB Restaurant, all improvements on the
NYB Restaurant premises, and all furniture, furnishings, fixtures, and
equipment.

B. Comprehensive general liability insurance, including product
liability, completed operations, and independent contractors coverage,
and comprehensive automobile liability coverage for both owned and
non-owned vehicles, and hired automobiles in the amount of $1,000,000,
and naming NYBE, its officers, directors, and employees (collectively,
"Indemnitees") as additional insureds in each such policy or policies.

C. Workers' compensation and employer's liability insurance, as
well as such other insurance as may be required by statute or rule of
the state in which the franchised business is located.

D. During any significant construction at the NYB Restaurant,
Franchisee will maintain or cause the general contractor to maintain
with a reputable insurer comprehensive general liability insurance
(with comprehensive automobile liability coverage for both owned and
nonowned vehicles, builder's risk, product liability, completed
operations, and independent contractors coverage) in at least the
amount of $1,000,000 with Indemnitees named as additional insureds,
and workers' compensation and employer's liability insurance and any
other insurance as may be required by law.

12.2. The insurance policies required by subparts (b) and (d) of
Section 12.1 hereof shall (i) be endorsed to be primary to and non-contributory
with any insurance maintained by Indemnitees, (ii) contain a waiver of any
rights of subrogation against Indemnitees, and (iii) contain a severability of
interest provision in favor of Indemnitees. Upon obtaining the insurance
required by this Agreement and on each policy renewal date thereafter,
Franchisee shall promptly submit evidence of satisfactory insurance and proof of
payment therefor to NYBE, and, if requested by NYBE, copies of all policies and
policy amendments. The evidence of insurance shall include a statement by the
insurer that the policy or policies will not be canceled or materially altered
without at least 30 days prior written notice to NYBE. NYBE may increase the
minimum protection or coverage requirements of any policy required under Section
12.1, as of its renewal date, and may require different or additional kinds of
insurance at any time to reflect

- 28 -

<PAGE>

inflation, identification of special risks, changes in law or standards of
liability, higher damage awards or other relevant changes in circumstances.

12.3. If Franchisee does not obtain and maintain the insurance
coverage required by this Agreement, as revised from time to time by the NYBE
Manual or otherwise in writing, NYBE may, but shall not be obligated to, procure
such insurance, and the cost or expense thereof, together with a reasonable fee
for NYBE's expenses in so acting, shall be payable by Franchisee immediately
upon demand.

12.4. Franchisee shall indemnify and hold NYBE harmless from and
against any and all actual or threatened claims, penalties, assessments,
regulatory proceedings, and litigation, including, without limitation all costs
and expenses and reasonable attorneys' fees incurred by NYBE in connection
therewith, arising from or out of the operation of the NYB Restaurant or any
occurrence at the NYB Restaurant premises, including, without limitation,
claims, penalties, assessments, regulatory proceedings, and litigation arising
in whole or in part out of the negligence of NYBE or its agents, employees,
directors, officers, or representatives (collectively, the "Claims"). NYBE
shall have the option, at its sole discretion, to request Franchisee to
undertake, in NYBE's name, the defense of any action relating to such Claims
wherein NYBE is named as a defendant or otherwise made a party or to assume such
defense with counsel satisfactory to NYBE. In either case, Franchisee shall
remain responsible for paying NYBE's costs of defense and of any judgment or
settlement in any such action. Franchisee's obligations to indemnify and hold
NYBE harmless shall not be limited in any way by reason of any insurance which
may be maintained by NYBE, nor shall Franchisee's performance of the obligation
to maintain insurance relieve Franchisee of liability under this indemnity
provision or be construed to be a limitation on the amount of Franchisee's
indemnity obligations. NYBE's right to indemnity under this Agreement shall
arise notwithstanding that joint or concurrent liability may be imposed on NYBE
by statute, ordinance, regulation, or other law. Notwithstanding any provisions
of this Section to the contrary, NYBE shall have no right to indemnification for
Claims arising solely out of NYBE's gross negligence.

12.5. Franchisee shall notify NYBE in writing within five days of
receipt of notice or knowledge of any claim, dispute, loss or damage, real or
alleged, arising from Franchisee's activities in, at or around the NYB
Restaurant, whether or not such claim names NYBE. Franchisee has no authority
to, and shall not, accept any service of process on behalf of NYBE or its
affiliates.

- 29 -

<PAGE>

ARTICLE 13. TRANSFER OF INTEREST.

13.1. NYBE shall have the right to transfer or assign all or any
part of its rights or obligations herein to any person or legal entity.

13.2. Before any interest in this franchise or the Franchisee may
be sold to a third party, it must first be offered for sale to the NYBE by
written notice delivered to NYBE in accordance with this Agreement by
Franchisee, such notice to specify the price and terms of any such sale. At any
time within 30 days after the service of such notice, NYBE may elect to purchase
such interest on similar terms and conditions by notifying Franchisee in writing
of its election to purchase the same. If NYBE does not elect to purchase such
interest in the foregoing manner, Franchisee may, subject to Franchisee's
compliance with the provisions of this Article 13 and the other provisions of
the Agreement, sell such interest to a third-party at a price that is not less
than the price specified in said written notice and upon terms not substantially
different from the terms specified in said written notice. If such sale is not
effected within six months following the expiration of the 30-day option period
set out above, the such interest in this franchise or the Franchisee may not be
sold to any third-party at any price without again complying with the aforesaid
procedure, in the same manner as if such interest had never before been offered
for sale to the NYBE. The provisions of this Section shall not apply to a
transfer to a corporation, partnership, or limited liability company formed by
the Franchisee for the convenience of ownership and not involving a change of
beneficial ownership, which transfer meets the conditions set forth in Section
13.5, and transfers to Franchisee's employees which meet the conditions set
forth in Section 13.8.

13.3. The rights and duties set forth in this Agreement are
personal to Franchisee and are granted in reliance on the individual and
collective business skill, financial capacity, and personal character of
Franchisee and its principals. Accordingly, neither Franchisee nor any
immediate or remote successor to any part of Franchisee's interest in this
franchise, nor any individual, partnership, corporation, or other legal entity
which directly or indirectly owns any interest in such entity, in the franchise
or in the Franchisee, shall sell, assign, transfer, convey, give away, pledge,
mortgage, or otherwise encumber any interest in this franchise or in Franchisee
without the prior written consent of NYBE, which consent NYBE may grant or
withhold in its sole discretion based solely upon what NYBE deems is in its best
interests. Any purported assignment or transfer, by operation of law or
otherwise, not having the written consent of NYBE required by this Section shall
be null and void and shall constitute a material breach of this Agreement, for
which NYBE may then terminate in accordance with Section 14.1.C without
opportunity to cure. If a transfer, alone or together with other previous,
simultaneous, or

- 30 -

<PAGE>

proposed transfers, would have the effect of transferring a controlling interest
(as reasonably determined by NYBE) in this franchise or in Franchisee, NYBE, in
its sole discretion, may require any or all of the following as conditions of
its approval:

A. All of Franchisee's accrued monetary obligations to NYBE and
its subsidiaries and affiliates and all other outstanding obligations
related to the franchised business shall have been satisfied;

B. Franchisee shall not be in default of any provision of this
Agreement, any amendment hereof or successor hereto, or any other
agreement between Franchisee and NYBE, or its subsidiaries and
affiliates;

C. The transferor shall have executed a general release, in a
form prescribed by NYBE, of any and all claims against NYBE and its
officers, directors, shareholders, and employees, in their corporate
and individual capacities, including, without limitation, claims
arising under federal, state and local laws, rules, and ordinances;
provided, however, that all rights enjoyed by the Franchisee and any
causes of action arising in its favor from the provisions of any
applicable franchise laws and regulations shall remain in force; it
being the intent of this proviso that any non-waiver provisions of
such laws be satisfied;

D. The transferee (and, if transferee is other than an
individual, such owners of a beneficial interest in the transferee as
NYBE may request) shall enter into a written assignment and assumption
agreement, in a form satisfactory to NYBE, assuming and agreeing to
discharge all of Franchisee's obligations under this Agreement;

E. The transferee (or, if transferee is other than an
individual, all owners of any beneficial interest in transferee) shall
demonstrate to NYBE's satisfaction that transferee meets NYBE's
educational, managerial, and business standards; possesses a good
moral character, business reputation, financial capacity, and credit
rating; has the aptitude and ability to conduct the business
franchised herein (as may be evidenced by prior related business
experience or otherwise); and has adequate financial resources and
capital to operate the business;

F. The transferee (and, if transferee is other than an
individual, such owners of a beneficial interest in the transferee as
NYBE may request) shall execute, for a term ending on the expiration
date of this Agreement and with such renewal term as may be provided
by this Agreement, the standard form franchise

- 31 -

<PAGE>

agreement then being offered to new System franchisees and such other
ancillary agreements as NYBE may require for the franchised business,
which agreements shall supersede this Agreement in all respects, and
the terms of which may differ from the terms of this Agreement;
provided, however, that the transferee shall not be required to pay
any initial franchise fee, the royalties and advertising fees payable
pursuant to Section 4.1 of this Agreement shall remain the same, and
the Assigned Territory provided for in this Agreement shall remain the
same;

G. Franchisee shall remain liable for all of the obligations to
NYBE in connection with the franchised business prior to the effective
date of the transfer and shall execute any and all instruments
reasonably requested by NYBE to evidence such liability;

H. At the transferee's expense, the transferee or, if requested
by Franchisee and consented to by NYBE, the transferee's manager shall
complete any training program then in effect for franchisees upon such
terms and conditions as NYBE may reasonably require; and

I. Except in the case of (i) a transfer to a corporation,
partnership, or limited liability company formed by the Franchisee for
the convenience of ownership and not involving a change of beneficial
ownership, which transfer meets the conditions set forth in Section
13.5 hereof, or (ii) a transfer to NYBE pursuant to Section 13.2,
Franchisee shall pay to NYBE a transfer fee in an amount equal to
$2,500, to cover NYBE's administrative and other expenses in
connection with the transfer.

13.4. Franchisee shall grant no security interest in the
franchised business or in any of its assets unless the secured party agrees that
in the event of any default by Franchisee under any documents related to the
security interest, NYBE shall have the option, but shall not be obligated, to be
substituted as obligor to the secured party and to cure any default of
Franchisee.

13.5. In the event that the Franchisee proposes, subsequent to the
execution of this Agreement, to transfer this franchise to a corporation,
partnership, or limited liability company formed by Franchisee, NYBE's consent
to such transfer shall be conditioned upon satisfaction of and compliance with
Section 7.11 of this Agreement and to the following additional requirements:

- 32 -

<PAGE>

A. Franchisee shall be the owner of all of the voting stock,
interests, or units of the corporation, partnership, or limited
liability company; and, if Franchisee is more than one individual,
each individual shall have the same proportionate ownership interest
in the corporation or limited liability company as he had in
Franchisee prior to the transfer.

B. All transferors shall execute a written agreement personally
guaranteeing the full payment and performance of Franchisee's
obligations to NYBE from the date of transfer and agreeing to be bound
by all the terms and conditions of this Agreement.

C. Transferee shall comply with all of the terms and conditions
set forth in Sections 13.3.A through 13.3.I hereof.

13.6. Upon the death or mental incompetency of any person with an
interest in this franchise or in Franchisee, the executor, administrator, or
personal representative of such person shall transfer his interest within six
months after such death or mental incompetency to a third party approved by
NYBE. Such transfers, including, without limitation, transfers by devise or
inheritance, shall be subject to the same conditions as any INTER VIVOS
transfer. However, in the case of transfer by devise or inheritance, if the
heirs or beneficiaries of any such person are unable to meet the conditions in
this Agreement, the personal representative of the deceased Franchisee shall
have a reasonable time to dispose of the deceased's interest in the franchise or
in Franchisee, which disposition shall be subject to all the terms and
conditions for transfers contained in this Agreement. If the interest is not
disposed of within a reasonable time, NYBE may terminate this Agreement.

13.7. Securities, units, or other ownership interests in
Franchisee may be offered by public or private offering, or otherwise, only with
the prior written consent of NYBE (whether or not NYBE's consent is required
under Section 13.3 hereof), which consent NYBE may grant or withhold in its sole
discretion based solely upon what NYBE deems is in its best interests. All
materials required for such offering by federal or state law shall be submitted
to NYBE for review prior to their being filed with any governmental agency; and
any materials to be used in any exempt offering shall be submitted to NYBE for
review prior to their use. No Franchisee offering shall imply (by use of the
Proprietary Marks or otherwise) that NYBE is participating in an underwriting,
issuance, or offering of Franchisee or NYBE securities, and NYBE's review of any
offering shall be limited solely to the subject of the relationship between
Franchisee and NYBE. Franchisee and the other participants in the offering must
fully indemnify NYBE in connection with the offering. For each proposed public
offering, Franchisee shall pay to NYBE a

- 33 -

<PAGE>

nonrefundable fee of Twenty Thousand Dollars ($20,000), or such greater amount
as is necessary to reimburse NYBE for its reasonable costs and expenses
associated with reviewing the proposed offering, including, without limitation,
legal and accounting fees. For each private offering of securities, Franchisee
shall pay to NYBE a fee in a reasonable amount determined by NYBE to reimburse
NYBE for time and expense associated with reviewing and approving or
disapproving the proposed private offering. Franchisee shall give NYBE written
notice at least 90 days prior to the date of commencement of any offering or
other transaction covered by this Section. Fees required by this Section are in
addition to transfer fees otherwise required by this Article 13.

13.8. Notwithstanding any provision to the contrary contained in
this Article 13, Franchisee may transfer not more than an aggregate of 25% of
the outstanding voting shares, units, or ownership interests of a Franchisee
operating as a corporation, partnership, or limited liability company to
employees of Franchisee who are actively engaged in the NYB Restaurant
operations, if such transfers, alone or together with other previous,
simultaneous, or proposed transfers, do not have the effect of transferring a
controlling interest (as reasonably determined by NYBE) in the Franchisee. The
ownership of such shares, units, or ownership interests by such employees will
be subject to all of the terms and conditions of this Agreement, including,
without limitation, Articles 11 and 13 hereof. Franchisee shall provide NYBE
with written notice of any such proposed transfer and all pertinent information
regarding the same not later than 30 days prior to the proposed date of
transfer.

13.9. NYBE's consent to a transfer of any interest in the
franchise granted herein shall not constitute a waiver of any claims it may have
against the transferring party, nor shall it be deemed a waiver of NYBE's right
to demand exact compliance with any of the terms of this Agreement by the
transferee.

ARTICLE 14. DEFAULT AND TERMINATION.

This Agreement may not be terminated except as provided in this
Agreement. Termination of this Agreement shall not relieve Franchisee of any
unfulfilled obligations to NYBE created hereunder unless it is so agreed by NYBE
in writing.

14.1. This Agreement may be terminated as follows:

A. Upon the expiration of its term.

- 34 -

<PAGE>

B. Upon the mutual agreement of the parties in writing to a
termination.

C. At NYBE's option, effective immediately upon the giving of
written notice to Franchisee, if Franchisee (i) fails to open the
franchised NYB Restaurant and commence operations within the time
schedule established under Article 5 hereof; (ii) ceases to operate
the NYB Restaurant or otherwise abandons the business, or forfeits the
legal right to do business in the jurisdiction where the NYB
Restaurant is located; (iii) is convicted of a felony or other crime
involving moral turpitude, consumer fraud, or crime or offense the
NYBE believes is likely to have an adverse effect on the Franchisee's
ability to carry out the duties imposed by this Agreement or to have
an adverse effect on the System and the goodwill associated therewith;
(iv) transfers (including transfers following death or incompetency)
of any rights or obligations in violation of the terms of Article 13
hereof; (v) misuses or discloses confidential information in violation
of Article 11 hereof, (vi) knowingly makes any false statements in any
report or document submitted to NYBE; (vii) submits more than two
written statements of Gross Revenues which under-report Gross Revenues
for any reporting period by two percent (2%) or more; (viii) suffers a
final judgment to remain unsatisfied or of record for 30 days or
longer (unless supersedeas bond is filed), or has execution levied
against Franchisee's business or property, or any suit is filed to
foreclose any lien or mortgage against the premises or equipment and
not dismissed within 30 days; or (ix) becomes insolvent or has a
receiver appointed to take possession of Franchisee's business or
property or any part thereof or makes a general assignment for benefit
of creditors.

D. At NYBE's option, without notice, in the event Franchisee
shall become bankrupt or become subject to a proceeding under any
chapter of the United States Bankruptcy Code, unless Franchisee shall:
(i) timely undertake to reaffirm the obligations under the Agreement,
(ii) timely comply with all conditions as legally may be imposed by
NYBE upon such an undertaking to reaffirm the Agreement, and (iii)
timely comply with such other conditions and provide such assurance as
may be legally required in or under relevant provisions of the United
States Bankruptcy Code; provided, however, that the parties
acknowledge that this Agreement constitutes a personal services
contract made in reliance on the qualifications and personal
characteristics of Franchisee and its directors, officers, or
shareholders, as the case may be, and in the expectation of a material
degree of personal involvement in the management and operation of the
franchised business, and consequently, the parties agree that any
attempt by any other party, including a trustee in bankruptcy or any
other third party, to assume

- 35 -

<PAGE>

or accept a transfer or assignment of this Agreement shall be void,
and that in no event shall this Agreement or any rights or duties of
Franchisee hereunder, be transferred to any individual or entity who
does not comply with all requirements for transfer specified in this
Agreement.

E. At the election of NYBE, effective upon the expiration of 30
days after giving of written notice, in the event franchisee defaults,
and does not cure to NYBE's reasonable satisfaction within the 30-day
notice period, in the performance of any other covenant or provision
of this Agreement, including without limitation, the obligation to pay
when due any financial obligation to NYBE, the obligation to make
reports and provide information when due hereunder, or failure to
maintain any of the standards or procedures prescribed for the
franchised business in this Agreement, the NYBE manual, or otherwise;
provided, however, that Franchisee shall be entitled to notice and
opportunity to cure any such default only once in any six-month
period, and any subsequent occurrence of the same or substantially
similar default within such six-month period shall entitle NYBE, at
its option, to terminate this Agreement effective immediately upon the
giving of notice and without opportunity to cure.

F. At the election of Franchisee, effective upon the expiration
of 90 days after written notice, if: (i) Franchisee dies or becomes
mentally incompetent and is unable or elects not to transfer its
interest in the franchise as permitted by Section 13.6 of this
Agreement; (ii) Franchisee has personally served as general manager
and becomes disabled by illness or injury from continuing to perform
such duties and elects not to employ a qualified general manager to
perform such duties; or (iii) Franchisee, acting in good faith and
after reasonable and diligent efforts, is unable to operate the
franchised NYB Restaurant at a profit.

14.2. No forbearance of the NYBE from asserting any default or
giving any permitted notice of termination shall constitute a waiver of such
default or right to terminate or an estoppel against such right as to any
continuing default or subsequent occurrence of a default, whether similar or
dissimilar in nature to the prior default. The rights of NYBE to terminate this
Agreement are in addition to, and not in lieu of, other remedies available at
law or equity for defaults by Franchisee in the payment and performance of its
obligations hereunder.

ARTICLE 15. OBLIGATIONS UPON TERMINATION.

- 36 -

<PAGE>

Upon the termination of this Agreement for any reason, all rights
granted hereunder to Franchisee shall terminate; and

15.1. Franchisee shall immediately and permanently cease to
operate the franchised business, and shall not thereafter, directly or
indirectly, represent itself to the public or hold itself out as a franchisee of
NYBE.

15.2. Franchisee shall immediately and permanently discontinue the
use of all Proprietary Marks, all similar names and marks, or any other
designation or mark indicating or tending to indicate that Franchisee is or was
a Franchisee. Franchisee shall promptly amend or terminate any filings or
registrations with any governmental authorities containing or pertaining to the
use of NYBE's name and Proprietary Marks. Franchisee shall not promote or
advertise the fact that it was formerly a franchisee of NYBE.

15.3. Franchisee shall surrender and transfer to NYBE or its
designee any and all rights to use the telephone numbers and other business
listings used by Franchisee for the franchised business. Franchisee agrees to
cooperate and execute any and all documents required to effect transfer of the
telephone numbers and other business listings from Franchisee to NYBE or its
designee.

15.4. Franchisee shall immediately turn over to NYBE all
materials, including, without limitation, all manuals and all customer lists,
marketing materials, instructions, and brochures, and any and all other
materials relating to the operation of the franchised business in Franchisee's
possession, custody, or control, and all copies thereof (all of which are
acknowledged to be NYBE's property), and shall retain no copy or record of the
foregoing, excepting only Franchisee's copy of this Agreement and of any
correspondence between the parties, and any other documents which Franchisee
reasonably needs for compliance with any provision of law.

15.5. Franchisee shall immediately and permanently discontinue all
advertising as a franchisee, including but not limited to removal of all signs
and other identifying marks and colors, and shall destroy or surrender to NYBE
any letterheads, forms, printed matter, and advertising containing NYBE's
Proprietary Marks and any similar or related names marks or designations tending
to indicate that Franchisee is or was an authorized Franchisee of NYBE.

- 37 -

<PAGE>

15.6. Franchisee shall, at its expense, immediately make such
modifications or alterations as may be necessary to distinguish the NYB
Restaurant so clearly from its former appearance and from other NYB Restaurants
operated under the System as to prevent any possibility of confusion therewith
by the public, and to prevent the operation of any business at the location of
the NYB Restaurant by Franchisee or others in derogation of this Section
(including, without limitation, removal of all distinctive physical and
structural features identifying NYB Restaurant in the System and removal of all
signs and emblems, and changing of telephone numbers and other directory
listings). Franchisee shall, at Franchisee's expense, make such specific
additional changes as NYBE may reasonably request for this purpose. If
Franchisee fails to initiate immediately and complete such alterations when
required by hereunder, Franchisee agrees that NYBE or its designated agents may
enter the NYB Restaurant and adjacent areas, and hereby grants NYBE an
irrevocable license and permit to go upon the NYB Restaurant premises for such
purposes, at any time to make such alterations, at Franchisee's sole risk and
expense, without responsibility for any actual or consequential damages to the
property of Franchisee or others. Franchisee acknowledges that such actions by
NYBE are authorized and permitted and shall not be deemed a violation of any
civil or criminal law or any basis for an action under such laws by Franchisee
or others. Franchisee expressly acknowledges that its failure to make such
alterations will cause irreparable injury to NYBE, and consents to entry, at
Franchisee's expense, of an ex parte order by any court of competent
jurisdiction authorizing NYBE or its agents to take such action, if NYBE seeks
such an order.

15.7. Franchisee shall immediately and permanently cease using
NYBE's System, including, but not limited to the NYBE Manual, any other
operating or training manuals or aids, advertising and promotional materials,
and all confidential material delivered to Franchisee pursuant to this
Agreement.

15.8. NYBE shall have the right, at its sole option, for a period
of 60 days following termination, to purchase at Franchisee's cost all usable
materials owned by Franchisee bearing the Proprietary Marks, and/or to purchase
Franchisee's office equipment, furniture, fixtures and moveable signs used in
the NYB Restaurant or at the Approved Location at their fair market value.
Franchisee shall not during such 60 day period remove from the NYB Restaurant or
the Approved Location, transfer, assign, hypothecate, pledge, or otherwise
encumber such office equipment, furniture, fixtures, and moveable signs.

15.9. Franchisee shall promptly pay all sums owing to NYBE and its
subsidiaries and affiliates. In the event of termination for any default of
Franchisee, such sums shall include payment of all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by

- 38 -

<PAGE>

NYBE as a result of the default, which obligation shall give rise to and remain,
until paid in full, a lien in favor of NYBE against any and all of the personal
property (including, without limitation, signs, equipment, furnishings,
furniture, and supplies) owned and used by Franchisee in connection with the NYB
Restaurant at the time of default.

15.10. Franchisee shall pay to NYBE all damages, costs, and
expenses, including reasonable attorneys' fees, incurred by NYBE in connection
with obtaining injunctive or other relief for the enforcement of any provisions
of this Article 15.

15.11. Except upon the expiration of the term of this Agreement
pursuant to Article 3 or termination by Franchisee pursuant to Section 14.1.F.,
Franchisee shall pay to NYBE a lump sum payment (as liquidated damages and not
as a penalty or in lieu of any other payments required under this Agreement)
equal to the total of all amounts required under Article 4 (franchise fees,
royalty fees, and marketing and advertising fees) for (i) the 18 calendar months
of operation of the NYB Restaurant preceding Franchisee's default, or (ii) the
period of time the NYB Restaurant has been in operation preceding the notice, if
less than 18 calendar months, projected on an 18 calendar month basis.

15.12. Termination of this Agreement shall not relieve Franchisee
of the obligations under Article 10 hereof to maintain and preserve financial
and other records and to make them available for inspection and audit by NYBE.

15.13. All covenants, obligations, and agreements of Franchisee
which by their terms or by reasonable implication are to be performed, in whole
or in part, after the termination or expiration of the term of this Agreement,
shall survive such termination or expiration.

ARTICLE 16. ADDITIONAL COVENANTS.

16.1. Franchisee agrees and acknowledges that, prior to executing
this Agreement, Franchisee has made such investigation of the System as
Franchisee deems necessary, that Franchisee understands that the results of
operations of the franchised NYB Restaurant are dependent upon the efforts and
management of Franchisee, and Franchisee hereby assumes full responsibility for
such operations. Franchisee shall retain and exercise management and control

- 39 -

<PAGE>

over the NYB Restaurant and its operations and shall require its general manager
to devote full time and attention to the operations and business of the NYB
Restaurant.

16.2. It is understood and agreed by all parties hereto that this
Agreement does not create a fiduciary relationship between them; that Franchisee
shall be an independent contractor; and, that nothing in this Agreement is
intended to constitute either party an agent, legal representative, subsidiary,
joint venturer, partner, employee, or servant of the other for the purpose
whatsoever. Nothing in this Agreement authorizes Franchisee to make any
contract, agreement, warranty, or representation on NYBE's behalf, or to incur
any debt or other obligation in NYBE's name or on NYBE's behalf; and that NYBE
shall in no event assume liability for, or be deemed liable hereunder as a
result of, any such action, or by reason of any act or omission of Franchisee in
its conduct of the franchised business, or any claim or judgment arising
therefrom against NYBE. Franchisee shall hold itself out to the public as an
independent contractor operating the business pursuant to a franchise from NYBE.
Franchisee agrees to take such affirmative action as may be necessary to do so,
including, without limitation, exhibiting a notice of that fact in a conspicuous
place on the premises of the franchised business, and, as directed by NYBE, in
Franchisee's advertising and on Franchisee's agreements, forms, stationery, and
promotional materials.

16.3. All payments to NYBE hereunder shall be made payable to New
York Bagel Enterprises, Inc. and, except as provided in the next sentence, shall
be tendered to NYBE in person at the address set forth in Article 18 below, or
by making such payment by mail, postage prepaid, to that address. At NYBE's
option, Franchisee shall give NYBE authorization in the form designated by NYBE,
to initiate debit entries and/or credit correction entries from and to the NYB
Restaurant bank operating account (the "Account") for payment of all sums due
NYBE under any of the provisions of this Agreement, including without limitation
royalties, advertising fund payments, purchases, and any interest charges due
thereon. Franchisee agrees to make funds available in the account for
withdrawal by electronic transfer no later than the date immediately preceding
the due date therefor. All payments received by NYBE from Franchisee shall be
applied to the oldest obligation, regardless of any contrary designation by
Franchisee. Franchisee agrees that Franchisee will not, on grounds of the
alleged non-performance by NYBE of any of its obligations hereunder, withhold
payment of any royalties, advertising contributions, amounts due to NYBE for
purchases by Franchisee, or any other amounts due NYBE.

ARTICLE 17. APPROVALS AND WAIVERS.

- 40 -

<PAGE>

17.1. Whenever this Agreement requires the prior approval or
consent of NYBE, Franchisee shall make a timely written request to NYBE
therefor, and such approval or consent shall be obtained in writing. Except as
otherwise expressly provided herein, NYBE may withhold any consent or approval
herein at its discretion.

17.2. NYBE shall have no liability for withholding any consent or
approval or for any delay or inaction in connection therewith, and the granting
of any approval or consent shall not imply or constitute any representation,
warranty, guaranty, or endorsement of the matter approved or consented to or an
assumption of any liability in connection therewith.

17.3. No delay, waiver, omission, or forbearance on the part of
NYBE to exercise any right, option, duty, or power arising out of any breach or
default by Franchisee, or any other franchisee, of any of the terms, provisions,
covenants, or conditions hereof shall constitute a waiver by NYBE to enforce any
such right, option, duty, or power as against Franchisee, or as to subsequent
breach or default by Franchisee. Subsequent acceptance by NYBE of any
obligations due to it hereunder shall not be deemed to be a waiver by NYBE of
any preceding breach by Franchisee of any terms, provisions, covenants, or
conditions of this Agreement.

ARTICLE 18. NOTICES.

Any and all notices required or permitted under this Agreement shall
be in writing and shall be personally delivered, mailed by certified or
registered mail, postage prepaid, return receipt requested, or sent via a
nationally recognized overnight delivery service, to the respective parties at
the following addresses unless and until a different address has been designated
by written notice to the other party:

Notices to NYBE: New York Bagel Enterprises, Inc.
250 N. Water
Wichita, Kansas 67202
ATTN: Franchise Department

Notices to Franchisee: ___________________________________
___________________________________
___________________________________
ATTN:______________________________

- 41 -

<PAGE>

Any notice by certified or registered mail or recognized overnight delivery
service shall be deemed to have been given at the date and time of mailing.

ARTICLE 19. ALTERNATIVE DISPUTE RESOLUTION.

19.1. Franchisee and Franchisor agree to submit, prior to
arbitration, all unsettled claims, disputes, controversies, and other matters in
question between them arising out of or relating to this Agreement (including
but not limited to any claim that the Agreement or any of its provisions is
invalid, illegal, or otherwise voidable or void), the dealings or relationship
between Franchisee and Franchisor, or Franchisee's operation of the Restaurant
("Disputes") to mediation in Wichita, Kansas and in accordance with the
Commercial Mediation Rules of the American Arbitration Association currently in
effect. Demand for mediation shall be made within a reasonable time after
cessation of negotiations.

A. Mediation shall be private, voluntary, and nonbinding. Any
party may withdraw from the mediation at any time before signing a
settlement agreement upon written notice to each other party and to
the mediator. The mediator shall be neutral and impartial. The
mediator's fees shall be shared equally by the parties. The mediator
shall be disqualified as a witness, consultant, expert, or counsel for
either party with respect to the matters in Dispute and any related
matters.

B. Unless the parties agree otherwise, the entire mediation
process shall be confidential and without prejudice. The parties and
the mediator shall not disclose any information, documents,
statements, positions, or terms of settlement. Nothing said or done
or provided by the parties in the course of mediation shall be
reported or recorded or, except as ordered by a court of competent
jurisdiction, placed in any legal proceeding or construed for any
purpose as an admission against interest. Nevertheless, evidence
otherwise discoverable or admissible is not excluded from discovery or
admission as a result of its use in mediation.

If a Dispute cannot be resolved through mediation, the parties agree to submit
the Dispute to arbitration, subject to the terms and conditions of this Section
XV.

19.2. Subject to Section 19.1, all Disputes between Franchisee and
Franchisor will be submitted for binding arbitration to the American Arbitration
Association on demand of either

- 42 -

<PAGE>

party. Such arbitration proceeding will be conducted in Wichita, Kansas and,
except as otherwise provided in this Agreement, will be heard by one arbitrator
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association then in effect. All matters relating to arbitration will be
governed by the federal Arbitration Act (9 U.S.C. Sections 1 et.seq.) and not by
any state arbitration law.

A. The arbitrator will have the right to award or include in
his award any relief which he deems proper under the circumstances,
including, without limitation, money damages (with interest on unpaid
amounts from the date due), specific performance, injunctive relief,
and attorneys' fees and costs, provided that the arbitrator will not
have the right to declare any Proprietary Marks generic or otherwise
invalid or to award exemplary or punitive damages. The award and
decision of the arbitrator will be conclusive and binding upon all
parties hereto, and judgment upon the award may be entered in any
court of competent jurisdiction.

B. Franchisee and Franchisor agree to be bound by the
provisions of any limitation on the period of time in which claims
must be brought under applicable law. Franchisee and Franchisor
further agree that, in connection with any such arbitration
proceeding, each must submit or file any claim which would constitute
a compulsory counterclaim (as defined by Rule 13 of the Federal Rules
of Civil Procedure) within the same proceeding as the claim to which
it relates. Any such claim which is not submitted or filed as
described above will be forever barred.

C. Franchisee and Franchisor agree that arbitration will be
conducted on an individual, not a class-wide, basis, and that an
arbitration proceeding between Franchisee and Franchisor may not be
consolidated with any other arbitration proceeding involving
Franchisee or Franchisor and another party.

19.3. Notwithstanding anything to the contrary contained in this
Section XV, Franchisee and Franchisor each have the right in a proper case to
obtain temporary restraining orders and temporary or preliminary injunctive
relief from a court of competent jurisdiction; provided, however, that
Franchisee and Franchisor must contemporaneously submit the Dispute for non-
binding mediation under Section 19.1 and then for arbitration under Section 19.2
on the merits as provided herein if such Dispute cannot be resolved through
mediation. Franchisee acknowledges that a proper case to obtain temporary
restraining orders and temporary or permanent injunctive relief from a court of
competent jurisdiction contemporaneously with

- 43 -

<PAGE>

submitting the Dispute to mediation and then to arbitration shall include, but
not be limited to, the following:

A. Any Dispute involving actual or threatened disclosure or
misuse of the contents of the NYBE Manual or any other confidential
information or Trade Secrets of Franchisor;

B. Any Dispute involving the ownership, validity, use of, or
right to use or license the Proprietary Marks;

C. Any action by Franchisor to enforce the covenants set forth
in Article 11 and Article 13 of this Agreement; and

D. Any action by Franchisor to stop or prevent any threat or
danger to public health or safety resulting from the construction,
maintenance, or operation of the Restaurant.

The provisions of this Article 19 are intended to benefit and bind certain third
party non-signatories and will continue in full force and effect subsequent to
and notwithstanding the expiration or termination of this Agreement.

ARTICLE 20. ENTIRE AGREEMENT.

This Agreement, the documents referred to herein, and the attachments
hereto, if any, constitute the entire, full, and complete Agreement between NYBE
and Franchisee concerning the subject matter hereof, and supersede all prior
agreements. No amendments, change, or variance from this Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.

ARTICLE 21. CONSTRUCTION AND MODIFICATION.

21.1. This Agreement contains the complete expression of the
agreement between the parties. There are no promises, representations,
inducements, or agreements between them of any nature that are not contained
herein. Franchisee acknowledges and agrees that it received ample time and
opportunity to review the Agreement and seek legal counsel with respect to the

- 44 -

<PAGE>

terms of this Agreement and the franchise granted hereby and is making this
Agreement based solely on its terms and not on any collateral representation or
promise, including, without limitation, any projections of profits to be
obtained by making this Agreement, which Franchisee acknowledges have not been
made, represented, or warranted to Franchisee.

21.2. This Agreement is governed by and shall be construed in
accordance with the laws of the State of Kansas.

21.3. Should any one or more parts of this agreement be declared
invalid for any reason by a court of competent jurisdiction, such decision shall
not affect the validity of any remaining portions of the Agreement, which shall
remain in full force and effect as if the Agreement had been executed without
such invalid parts, except to the extent the absence of the provisions
invalidated would frustrate or make it impossible to achieve the purposes for
which the Agreement was made. Should the requirements of any applicable law or
regulation change or modify the terms of this agreement or conflict with its
provisions, such change or modification shall not be applicable to this
agreement unless such change is lawfully mandated by the authority making the
same, in which case only the provisions affected by such law or regulation shall
be affected, and the agreement shall otherwise remain in full force and effect,
as modified to be consistent with such law or regulation.

21.4. This Agreement is made solely for the benefit of the parties
hereto and their respective successors and permitted assigns, and nothing herein
shall create any right to rely upon the terms hereof in favor of any third party
nor confer any right or remedy upon any third party, except as specifically
provided in Section 11.9 hereof.

21.5. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provisions hereof.

21.6. All terms and words used in this Agreement, regardless of
numbers and genders in which they are used, shall be deemed to include singular
or plural and all genders as the context or sense of this Agreement or any
paragraph or clause herein may require.

- 45 -

<PAGE>

21.7. All acknowledgments, promises, covenants, agreements, and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all those executing this Agreement on behalf of
Franchisee.

21.8. Time is of the essence of this Agreement and all provisions
hereof shall be so interpreted. Any provision of this Agreement which imposes
an obligation after termination or expiration of this Agreement shall survive
such termination or expiration.

21.9. No right or remedy conferred upon or reserved to NYBE or
Franchisee by this Agreement is intended to be, nor shall be deemed, exclusive
of any other right or remedy herein or by law or equity provided or permitted,
but each shall be cumulative of every other right or remedy.

21.10. Nothing herein contained shall bar NYBE's right to obtain
injunctive relief against threatened conduct that will cause it loss or damage,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.

21.11. In the event that Franchisee commences any action against
NYBE with respect to any Dispute, such action shall be brought only in a federal
or state court sitting within Sedgwick County, Kansas. Franchisee consents to
the exercise of jurisdiction by courts within Sedgwick County, Kansas over any
claims or counterclaims against Franchisee.

21.12. In the event NYBE incurs legal fees or costs or other
expenses to enforce any obligation of Franchisee hereunder, or to defend against
any claim, demand, action or proceeding by reason of Franchisee's failure to
perform or observe any obligation imposed upon Franchisee by this Agreement,
then NYBE shall be entitled to recover from Franchisee the amount of all legal
fees, costs and expenses, including reasonable attorneys' fees, whether incurred
prior to, or in preparation for or contemplation of the filing of any claim,
demand, action, or proceeding to enforce any obligation of Franchisee hereunder
or thereafter or otherwise.

ARTICLE 22. EXECUTION OF AGREEMENT.

- 46 -

<PAGE>

22.1. This Agreement may be executed in counterparts, which
together shall constitute one agreement of the parties.

22.2. By signing this Agreement, Franchisee acknowledges that it
has received a complete copy of this Agreement, with any Exhibits referred to
herein attached, at least five business days prior to the date on which this
Agreement was executed, and further acknowledges that it has received the NYBE's
Uniform Franchise Offering Circular at least ten business days prior to the date
on which this Agreement was executed. Franchisee further acknowledges that no
agent or employee of NYBE is authorized to make any representation or warranty
inconsistent with or in addition to the terms of this Agreement or the Franchise
Offering Circular. By signing this Agreement, Franchisee represents and
warrants to NYBE that no such representation or warranty, including specifically
any representation as to the potential success or profitability of the
franchised business, has been made or relied upon.

IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement as of the day and year first above written.

NEW YORK BAGEL ENTERPRISES, INC.
a Kansas corporation

DATED: _____________ By: ________________________________

"NYBE" or "Franchisor"

____________________________________

DATED: _____________ By________________________________

"Franchisee"

- 47 -

<PAGE>

GUARANTY

As an inducement to New York Bagel Enterprises, Inc. to enter into the
foregoing Franchise Agreement, which it is unwilling to do but for this
Guaranty, the undersigned individually and, if more than one Guarantor, jointly
and severally guarantee the payment and performance of all obligations of the
Franchisee under the Agreement. This shall be an unconditional, irrevocable,
and continuing guaranty for the entire term of this Agreement, including any
renewal terms.

The undersigned agree that they are willing to remain fully bound by
this Guaranty notwithstanding any action or inaction of the Franchisor and
Franchisee in connection with the Agreement, and that their obligation shall not
be modified, waived, or released by any modification, amendment, or departure
from the terms of the Agreement, or by any forbearance, extension of time,
waiver, or release granted by Franchisor to Franchisee or any Guarantor or with
respect to any security held by Franchisor. The undersigned expressly waive any
notice of all such matters and agree to pay and perform the obligations of
Franchisee without notice or demand from the Franchisor and without any
requirement that Franchisor first proceed against Franchisee or any other
Guarantor.

IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty
as of the date of the Franchise Agreement.

___________________________________________
ATTEST:

___________________________________

___________________________________________
ATTEST:
"Guarantor"

___________________________________

- 48 -

<PAGE>

- 49 -

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.
FRANCHISE AGREEMENT

OWNERS OF FRANCHISEE

Interest in
Name of Owner Franchisee
- ------------- --------------

_________________________________________________________ ______________

TOTAL 100%

Exhibit "A"

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

FRANCHISE AGREEMENT

COVENANT AGREEMENT

The form of Covenant Agreement currently offered by Franchisor is
attached.

(Refer to Section 11.7 of Franchise Agreement.)

Exhibit "B"

<PAGE>

GUARANTY

IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty
as of the date of the Franchise Agreement.

___________________________________________
ATTEST:

___________________________________

___________________________________________
ATTEST:
"Guarantor"

___________________________________

Exhibit C

<PAGE>

GUARANTY

The undersigned agree that they are willing to remain fully bound by
this Guaranty notwithstanding any action or inaction of the Franchisor and
Developer in connection with the Agreement, and that their obligation shall not
be modified, waived, or released by any modification, amendment, or departure
from the terms of the Agreement, or by any forbearance, extension of time,
waiver, or release granted by Franchisor to Developer or any Guarantor or with
respect to any security held by Franchisor. The undersigned expressly waive any
notice of all such matters and agree to pay and perform the obligations of
Developer without notice or demand from the Franchisor and without any
requirement that Franchisor first proceed against Developer or any other
Guarantor.

IN WITNESS WHEREOF, each of the undersigned has executed this Guaranty
as of the date of the Development Agreement.

___________________________________________
ATTEST:

___________________________________

___________________________________________
ATTEST:
"Guarantor"

___________________________________

Exhibit D

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

COVENANT AGREEMENT

THIS COVENANT AGREEMENT is entered into as of the ___ day of ________,
19__, by and among New York Bagel Enterprises, Inc. ("Franchisor") and
_______________________ (whether one or more "Covenantors").

W I T N E S S E T H: That;

WHEREAS, Covenantors have agreed to enter into this Agreement to induce
Franchisor to enter into that certain Franchise Agreement dated __________, 19__
between Franchisor and ___________________ ("Franchisee").

NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the Covenantors covenant and agree as follows:

1. Capitalized terms used herein and not otherwise defined shall have the
same meaning as defined in the Franchise Agreement.

2. During the term of the Franchise Agreement and thereafter, except as
otherwise approved in writing by Franchisor, the Covenantors shall not, either
directly or indirectly, individually, or through or on behalf of, or in
conjunction with any person, persons, or entity:

a. Copy or disclose to any person other than Franchisee's employees
(and then only to employees who have a need to know) (i) any knowledge,
information, or know-how concerning the System, or (ii) all or any portion
of the NYBE Manual or any other confidential materials, including without
limitation, plans, specifications, site layouts, marketing and advertising
materials, data, financial information, or other materials deemed
confidential by Franchisor. Covenantors shall at all times treat the NYBE
Manual and the information contained therein as confidential, and shall use
all reasonable efforts to maintain such information as secret and
confidential and shall use the same only in the operation of the
Restaurant. The NYBE Manual shall at all times remain the sole property of
Franchisor, and shall be returned to Franchisor immediately upon expiration
or termination of this Agreement. Any and all information, knowledge,
know-how, and other

Exhibit E

<PAGE>

data, which Franchisor designates as confidential shall be deemed
confidential for purposes of this Agreement, except information which
Covenantors can demonstrate came to their attention prior to disclosure
thereof by Franchisor; or which, at or after the time of disclosure by
Franchisor to Covenantors, had become a part of the public domain, through
publication or communication by others.

b. During the term of the Franchise Agreement, Covenantors shall not
compete, or be associated, directly or indirectly as an owner, officer,
director, employee, consultant, or otherwise, in any business in
competition with the System, and, for a period of two years after any
transfer or termination of the Franchise Agreement for any reason,
Covenantors shall not compete, or be associated, directly or indirectly as
an owner, officer, director, employee, consultant, or otherwise, in any
business in competition with the System which is located within (i) the
Assigned Territory, (ii) the Designated Market Area or Areas identified by
the then-current Nielson Wall Map published by the A.C. Nielson Company
("DMA"), in which the Assigned Territory is located, or (iii) the DMA of
any other System Restaurant then existing; provided, however, that passive
ownership of less than five percent (5%) of the outstanding voting
securities of a publicly held corporation (which for purposes of this
Agreement means a corporation registered under the Securities Exchange Act
of 1934) shall not be deemed a violation of this Section. In the event the
A.C. Nielson Company discontinues the publication of Nielson Wall Maps for
any reason, Franchisor shall have the right to designate an alternate
generally recognized market identification resource for use in connection
with this Section.

c. Covenantors shall not employ or seek to employ any person who is
or was within the immediate past six (6) months employed by Franchisor or
any other System franchisee or induce or seek to induce any such person to
leave his or her employment without the consent of such employee's current
employer. Franchisor shall not employ or seek to employ any person who is
or was within the immediate past six (6) months employed by Franchisee or
induce or seek to induce any such person to leave his or her employment.
Any party violating the provisions of this Section 2.c shall pay to the
former employer as liquidated damages (which the parties agree are
difficult of ascertainment) an amount equal to two times the annual salary
of the employee involved, plus all costs and attorneys fees incurred by the
former employer in connection with such default. The parties hereto agree
that each current and future franchisee in the System shall be a third
party beneficiary of the provisions of this Section 2.c, and shall be
entitled to enforce the provisions hereof. Franchisor shall have no
obligation to enforce the provisions of this Section 2.c for the benefit of
any current or future franchisee in the System.

d. In the event any provision of this Agreement is deemed by a court
of competent jurisdiction to be more restrictive than permissible at law or
equity, the

-2-

<PAGE>

Covenantors agree that the provisions hereof may be reformed and modified
and enforced by such court to the maximum extent permissible under
applicable law and principles of equity. Covenantors agree that specific
performance and injunctive relief are necessary and appropriate remedies
for violations of this Agreement and agree to enforcement of such remedies,
but without prejudice to the right of Franchisor to recover money damages,
which are in no event a full and adequate remedy for such violations.

3. The Covenantors agree that the existence of any claim that any of them
may have against Franchisor shall not constitute a defense to the enforcement by
Franchisor of this Agreement or the covenants contained in Article 11 of the
Franchise Agreement.

4. This Agreement and the documents provided for herein contain the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior negotiations, agreements, and understandings with respect
thereto. This Agreement may only be amended by a written document duly executed
by all parties hereto. This Agreement shall be governed by and construed in
accordance with the laws of the State of Kansas. This Agreement shall inure to
the benefit of and shall be binding upon the respective successors, heirs,
administrators, executors, personal representatives, trustees, and assigns of
the parties hereto. This Agreement may be executed in multiple counterparts,
each considered an original, but all of which shall constitute but one
Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement.

NEW YORK BAGEL ENTERPRISES, INC.

By____________________________________
"Franchisor"

_______________________________________

-3-

<PAGE>

"Covenantors"

-4-

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

CONFIDENTIALITY AGREEMENT

This Confidentiality Agreement is made and entered into as of the
day of _______________________, 19__ , by and between _____________
_________________________ ("Recipient"), and New York Bagel Enterprises, Inc.,
a Kansas corporation ("NYBE").

W I T N E S S E T H: That,

WHEREAS, Recipient desires to review certain confidential and proprietary
information regarding New York Bagel Enterprises, Inc., its affiliates, or
franchisees (the "Proprietary Information"), for the purpose of evaluating
whether to directly or indirectly enter into a business relationship with NYBE;
and

WHEREAS, NYBE desires to disclose certain proprietary information to
Recipient, but only pursuant to the terms of this Agreement.

NOW, THEREFORE, in consideration of the covenants and premises herein
contained, and for other good and valuable consideration received, it is hereby
agreed as follows:

1. Recipient acknowledges and agrees that all Proprietary Information it
receives from NYBE, its affiliates, or franchisees is confidential and
proprietary information in which NYBE has a proprietary interest. For purposes
of this Agreement, Proprietary Information may include, by way of example, but
without limitation, data, know-how, processes, designs, sketches, photographs,
plans, drawings, specifications, reports, financial information, customer lists,
pricing information, studies, findings, inventions, and ideas. Recipient agrees
that any information received from NYBE, its subsidiaries, affiliates, or
franchisees (i) shall only be used for purposes of evaluating whether Recipient
desires to directly or indirectly enter into a business relationship with NYBE,
and (ii) shall not be disclosed to any third party without the prior written
consent of NYBE. Recipient agrees to use reasonable care to prevent the
disclosure of the Proprietary Information to any third party, and further agrees
to limit the dissemination of the Proprietary Information within its own
organization to individuals whose duties justify the need to know such
information, and then only provided that there is a clear understanding by such

Exhibit F

<PAGE>

individuals of their obligation to maintain the confidential status of the
Proprietary Information and to restrict its use solely to the purposes specified
herein.

2. Recipient acknowledges that no other right or license to use the
Proprietary Information is granted by this Agreement, and agrees that the amount
of the Proprietary Information to be disclosed to Recipient is completely within
the discretion of NYBE. Upon completion of its review of the Proprietary
Information (or sooner upon request), Recipient agrees to return all written
materials received from NYBE, its affiliates, subsidiaries, or franchisees.

3. Recipient shall be under no obligation under this Agreement with
respect to any information (i) which is, at the time of the disclosure,
available to the general public; (ii) which becomes at a later date available to
the general public through no fault of the Recipient and then only after said
date; or (iii) which Recipient can demonstrate was in its possession before
receipt.

4. This Agreement constitutes the entire agreement and understanding among
the parties hereto, and shall not be amended except pursuant to a written
agreement executed by each of the parties hereto. This agreement shall be
binding upon the parties hereto and their respective heirs, administrators,
successors, and assigns.

IN WITNESS WHEREOF, the parties hereto have executed this agreement on the
day, month, and year first above written.

___________________________________ NEW YORK BAGEL ENTERPRISES, INC.

By _________________________________ By_____________________________________
Name:_______________________________ Name:__________________________________
Title:______________________________ Title:_________________________________

"Recipient"

-2-

<PAGE>

ADDENDUM TO LEASE AGREEMENT

THIS ADDENDUM TO LEASE (the "Addendum") is made as of the _____ day of
_______________, 19____, by and between ________________________________
__________________________________________________________________, as Lessor or
Landlord ("Landlord"), and ________________________________________________,
__________________________________________ as Lessee or Tenant ("Tenant").

RECITALS

The parties hereto acknowledge and agree that Tenant is a party to a
Franchise Agreement with New York Bagel Enterprises, Inc., a Kansas corporation
(the "Franchise Agreement"). Pursuant to the Franchise Agreement, Tenant agreed
to cause the provisions contained in this Addendum to be made a part of the
lease agreement between Tenant and Landlord, a copy of which is attached hereto
and incorporated herein by reference (the "Lease Agreement").

In order to induce Tenant to enter into the Lease Agreement, and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Landlord and Tenant hereby agree to the following additional terms
and provisions to the Lease Agreement, and further agree that, to the extent
that the terms and conditions of the Lease Agreement conflict with the terms and
provisions of this Addendum, the terms and provisions of this Addendum shall
control:

1. NOTICE OF DEFAULT. Upon the occurrence of any default by Tenant under
the terms and provisions of the Lease Agreement, Landlord shall concurrently
give written notice of such default to Tenant at the address specified in the
Lease Agreement and to New York Bagel Enterprises, Inc., a Kansas corporation,
and its successors and assigns ("NYBE"), at 250 North Water, Wichita, Kansas
67202, or such other address as may be designated in writing by NYBE.

2. FRANCHISOR'S RIGHT TO ENTER LEASED PREMISES. Upon the occurrence of
any default by Tenant under the terms and provisions of the Lease Agreement
and/or the Franchise Agreement, NYBE shall have the right (but not the duty) to
enter the leased premises to remove signage and to otherwise make such
modifications or alterations to the leased premises which

Exhibit G

<PAGE>

NYBE deems reasonably necessary to protect its proprietary marks and
distinguishing characteristics of NYBE locations.

3. ASSUMPTION OF LEASE. Upon the occurrence of any default by the Tenant
under the terms and provisions of the Lease Agreement or the Franchise
Agreement, or upon the expiration or termination of the Franchise Agreement,
NYBE shall have the right (but not the duty) to assume Tenant's rights and
obligations under the Lease Agreement, but NYBE must exercise such right not
more than 15 business days after the later of (i) the expiration of any cure
period under the Lease Agreement or the Franchise Agreement without cure by the
Tenant, or (ii) the receipt of written notice of such default under the Lease
Agreement by NYBE.

4. THIRD-PARTY BENEFICIARY. The parties hereto acknowledge and agree
that NYBE is intended to be a third-party beneficiary under the Lease Agreement
and this Addendum.

IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of
the date first above written.

__________________________________
"Landlord"

__________________________________
"Tenant"

-2-

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Combined Financial Statements

December 31, 1995, 1994 and 1993

(With Independent Auditors' Report Thereon)

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
New York Bagel Enterprises, Inc.:

We have audited the accompanying combined balance sheets of New York Bagel
Enterprises, Inc. as of December 31, 1995 and 1994, and the related combined
statements of operations, stockholders' equity (deficit), and cash flows for
each of the years in the three-year period ended December 31, 1995. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of New York
Bagel Enterprises, Inc. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1995, in conformity with generally accepted accounting
principles.

February 21, 1996, except
for note 14 which is as
of June 4, 1996

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Combined Balance Sheets

December 31, 1995 and 1994

ASSETS (NOTE 7) 1995 1994
--------------- ---- ----
Current assets:
Cash $ 133,425 46,200
Accounts receivable (notes 3 and 10) 137,853 114,492
Inventory 143,964 81,913
Deferred costs (note 4) 77,100 6,428
Other current assets (note 9) 24,018 8,598
--------- -------
Total current assets 516,360 257,631

Property, plant and equipment, net (note 5) 1,256,154 554,340
Other assets, net of accumulated amortization
of $12,433 in 1995 and $4,063 in 1994 55,658 60,027
Deferred offering costs 8,474 -
Goodwill, net of accumulated amortization of
$999 in 1995 (note 12) 458,052 -
--------- -------
$ 2,294,698 871,998
--------- -------
--------- -------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------

Current liabilities:
Current installments of long-term debt(note 7) $ 519,936 58,700
Accounts payable 163,172 58,640
Accrued liabilities 83,761 99,062
Current portion of deferred franchise fees 69,000 119,500
Distributions payable (note 10) 48,693 42,000
--------- -------
Total current liabilities 884,562 377,902

Due to stockholders (note 8) - 67,341
Long-term debt, less current portion (note 7) 2,845,064 232,942
Deferred franchise fees 98,000 -
Deferred credits 45,537 30,059
Deferred income taxes (note 9) - 4,786
--------- -------
Total liabilities 3,873,163 713,030
--------- -------
Stockholders' equity (deficit) (notes 10 and 14):
Class A common stock, $.01 par value.
Authorized 25,000,000 shares; issued and
outstanding 1,416,988 shares 14,170 14,170
Class B common stock, $.01 par value.
Authorized 5,000,000 shares; issued and
outstanding 1,368,704 shares 13,687 13,687
Additional paid-in capital 157,793 151,293
Accumulated deficit (1,764,115) (20,182)
--------- -------

Total stockholders' equity (deficit) (1,578,465) 158,968

Commitments and contingencies(notes 6 and 13)
--------- -------
$ 2,294,698 871,998
--------- -------
--------- -------

See accompanying notes to combined financial statements.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Combined Statements of Operations

Years Ended December 31, 1995, 1994 and 1993

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenues:
Sales from Company-owned restaurants $ 6,875,146 5,653,177 3,538,612
Franchise revenues (note 3) 484,300 168,704 22,677
--------- --------- ---------
Total revenues 7,359,446 5,821,881 3,561,289
--------- --------- ---------

Costs and expenses:
Cost of sales 2,612,772 2,280,012 1,527,246
Restaurant operating expenses (note 6) 3,083,902 2,326,178 1,386,676
General and administrative expenses 838,190 451,900 468,691
Depreciation and amortization 158,996 116,960 80,145
--------- --------- ---------
Total costs and expenses 6,693,860 5,175,050 3,462,758
--------- --------- ---------
Operating income 665,586 646,831 98,531

Interest expense 39,800 52,383 13,745
--------- --------- ---------
Earnings before income taxes 625,786 594,448 84,786

Income tax expense (benefit) (note 9) 6,689 (2,498) 9,280
--------- --------- ---------
Net earnings $ 619,097 596,946 75,506
--------- --------- ---------
--------- --------- ---------
Pro forma income to reflect income taxes
(note 2(i)):

Income tax expense $ 245,628
---------
---------

Net earnings $ 380,158
---------
---------

</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Combined Statements of Stockholders' Equity (Deficit)

Years Ended December 31, 1995, 1994 and 1993

Common Stock Additional
---------------------- Paid-In Accumulated
Class A Class B Capital Deficit Total
------- ------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>

Balance, December 31, 1992 $ 14,170 13,687 101,043 (78,374) 50,526
Net earnings - - - 75,506 75,506
------- ------ ------- ---------- ---------
Balance, December 31, 1993 14,170 13,687 101,043 (2,868) 126,032
Contributed capital (note 10) - - 50,250 - 50,250
Net earnings - - - 596,946 596,946
Distributions to stockholders
(note 10) - - - (614,260) (614,260)
------- ------ ------- ---------- ---------

Balance, December 31, 1994 14,170 13,687 151,293 (20,182) 158,968
Net earnings - - - 619,097 619,097
Stock compensation - - 6,500 - 6,500
Distributions to stockholders
(note 10) - - - (2,363,030) (2,363,030)
------- ------ ------- ---------- ---------
Balance, December 31, 1995 $ 14,170 13,687 157,793 (1,764,115) (1,578,465)
------- ------ ------- ---------- ---------
------- ------ ------- ---------- ---------

</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Combined Statements of Cash Flows

Years Ended December 31, 1995, 1994 and 1993

1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 619,097 596,946 75,506
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 158,996 116,960 80,145
Noncash stock compensation expense 6,500 - -
Increase (decrease) in cash resulting from
changes in listed items, net of effects
from acquisitions:
Deferred income taxes 1,302 (2,498) 5,614
Inventory (178,209) (28,451) (16,413)
Income taxes receivable 1,300 - (1,300)
Other current assets (1,588) (4,348) 1,296
Accounts receivable (23,361) (105,638) (8,854)
Deferred costs (70,672) (6,428) -
Other assets (2,403) (52,318) (3,535)
Accounts payable 140,253 30,882 10,330
Accrued liabilities and deferred credits 78,509 34,138 47,416
Income taxes payable - (2,295) 1,364
Deferred franchise fees 47,500 119,500 -
--------- ------- ------
Net cash provided by operating activities 777,224 696,450 191,569
--------- ------- ------

Cash flows from investing activities:
Additions to property, plant and equipment (474,674) (285,080) (583,708)
Acquisitions, net of cash acquired (656,174) - -
--------- ------- ------
Net cash used in investing activities (1,130,848) (285,080) (583,708)
--------- ------- ------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,049,210 252,865 379,325
Principal payments on long-term debt (90,852) (128,309) (48,248)
Decrease in due to stockholders (26,330) (40,274) (1,411)
Decrease in distributions payable (8,807) - -
Proceeds from contributed capital - 50,250 -
Debt issuance costs (13,916) - -
Deferred offering costs (8,474) - -
Distributions to stockholders (2,459,982) (394,080) -
(Decrease) increase in excess of checks written
over funds on deposit - (105,622) 62,473
--------- ------- ------
Net cash provided by (used in) financing
activities 440,849 (365,170) 392,139
--------- ------- ------
Net increase in cash 87,225 46,200 -

Cash at beginning of year 46,200 - -
--------- ------- ------
Cash at end of year $ 133,425 46,200 -
--------- ------- ------
--------- ------- ------

</TABLE>

See accompanying notes to combined financial statements.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements

December 31, 1995, 1994 and 1993

(1) REORGANIZATION AND OPERATIONS
Reorganization
The Company was formed as a result of a merger (the Merger) between New
York Bagel Enterprises, Inc., which became the surviving corporation, and
New York Bagel Shop, Inc.; New York Bagel Shop & Delicatessen, Inc.;
Bagels of Norman, Inc.; Bagel Boss, Inc.; and VPR Incorporated (the five
restaurant entities). The Merger was effective on December 31, 1995
whereby each of the five restaurant entities were merged into New York
Bagel Enterprises, Inc. (collectively the five restaurant entities and
New York Bagel Enterprises, Inc. are referred to as the Prior Entities).
The term Company as used herein refers to New York Bagel Enterprises,
Inc. including the five restaurant entities unless the context otherwise
requires.

To effect the Merger, New York Bagel Enterprises, Inc. issued 1,368,704
shares of its Class B common stock in exchange for all the outstanding
stock of each of the five restaurant entities.

Since the primary stockholders of each of the five restaurant entities
prior to the Merger are also the primary stockholders of the Company
subsequent to the Merger, the Merger essentially represents a transfer to
New York Bagel Enterprises, Inc. of nonmonetary assets in exchange for
stock prior to a proposed public offering of the Company's common stock
(the Offering). The Merger has been accounted for at historical cost.

The accompanying financial statements are presented on a combined basis for
all periods presented since this is the most meaningful presentation of
the business which will be effecting the Offering and due to substantial
commonality of ownership and management of the Prior Entities throughout
the period of the financial statements.

While the Company's management intends to pursue the Offering, there is no
assurance that the Offering will be consummated or if consummated, what
the related terms will be.

The Company converted the number of shares of Class A common stock
outstanding in connection with the Merger (effectively a 3373.78:1 stock
split). The outstanding shares of common stock, as reflected in the
accompanying financial statements, include the effect of such stock
conversion and the shares issued to effect the Merger for all periods
presented.

OPERATIONS
The Company operates Company-owned restaurants and sells franchise rights
to operate restaurants. In both instances, the restaurants operate under
the New York Bagel and Delicatessen concept which is a quick-service
bakery featuring freshly made bagels and deli-style sandwiches. As of
December 31, 1995, the Company has 15 Company-owned restaurants primarily
located in Oklahoma and Kansas and 25 franchised restaurants located
throughout the United States.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) FRANCHISE REVENUES
Franchise agreements are executed for each franchise restaurant and
provide the terms of the franchise arrangement between the Company
and the franchisee. The franchise agreement requires the franchisee
to pay an initial, non-refundable franchise fee plus continuing
royalties based upon a percentage of restaurant sales.
Additionally, the Company executes development agreements with
franchisees which stipulates the area, the number of restaurants,
and the timeframe for development in exchange for an initial, non-
refundable development fee based on a standard price per type of restaurant.

Initial franchise fees are recognized as revenue when the Company
performs substantially all initial services required by the
franchise agreement, which generally occurs shortly after restaurant
opening. Continuing royalties are recognized as earned with an
appropriate provision for estimated uncollectible amounts. Initial
franchise fees received applicable to restaurants for which
substantially all initial services required by the franchise
agreement have not been performed are recorded as deferred franchise
fees in the accompanying balance sheets. Development fees are
received upon signing the agreement and are initially recorded as
deferred franchise fees. Such fees are applied to reduce the
initial franchise fees paid for each store opened and are accounted
for as a component of the initial franchise fees.

Deferred initial and development fees that are expected to be
recognized within twelve months of the balance sheet date are
classified as current portion of deferred franchise fees in the
accompanying balance sheets.

(b) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.

(c) DEFERRED FRANCHISE COSTS
Direct, incremental costs incurred to secure franchise agreements
are charged to expense in the same period the related initial
franchise fees are recognized as revenue. Costs applicable to
initial franchise fees not yet recognized as revenue are recorded as
deferred franchise costs.

(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized on a
straight-line basis over the lesser of the remaining lease term,
including renewal periods when the Company intends to exercise
renewal options, or the estimated useful life of the asset.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) GOODWILL
Goodwill, which represents the excess of purchase price over fair
value of net assets acquired, is amortized on a straight-line basis
over 20 years. The Company periodically assesses the recoverability
of this intangible asset by determining whether the amortization of
the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured
based on projected future operating cash flows discounted at a rate
commensurate with the risks involved. The assessment of the
recoverability of goodwill will be impacted if estimated future
operating cash flows are not achieved.

(f) INCOME TAXES
Effective January 1, 1994, New York Bagel Enterprises, Inc. and
certain of the restaurant entities elected and received approval to
become S corporations. During the periods the entities operated as
S corporations, income tax expense or benefit was not recorded in
the accompanying financial statements as the entities' results of
operations were reported to the entities' stockholders for inclusion
in their individual income tax returns.

Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR
INCOME TAXES (Statement 109). Under the asset and liability method
of Statement 109, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. There was no
cumulative effect of adoption of Statement 109 as of January 1,
1993.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(g) STATEMENTS OF CASH FLOWS
Noncash investing and financing activities during 1995 and 1994
included:

1995 1994
---- ----
<S> <C> <C>

Noncash distributions to stockholders:
Distributions payable (see note 10) $ 15,500 42,000
-------- --------
Net asset (liability) distributions
(see note 10):
Assets distributed 137,134 507,695
Liabilities distributed (249,586) (329,515)
-------- --------
Net assets (liabilities) distributed (112,452) 178,180
-------- --------
Total noncash distributions $ (96,952) 220,180
-------- --------
-------- --------

Property, plant and equipment acquired
in exchange for increase in due to
stockholders (see note 8) $ - 44,250
-------- --------
-------- --------

Long-term debt issued to seller in connec-
tion with acquisition (see note 7) $ 115,000 -
-------- --------
-------- --------

</TABLE>

Cash paid during the years for interest and taxes is as follows:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>

Interest $ 36,676 52,383 13,745
Taxes - 3,660 1,300

</TABLE>

(h) PREOPENING COSTS
Direct, incremental restaurant preopening costs, comprised
primarily of the cost of hiring and training restaurant employees
and rent, are amortized over the initial twelve months of a
restaurant's operations.

(i) PRO FORMA INCOME TAX EXPENSE
Subsequent to the proposed Offering, the Company will no longer
operate as an S corporation. Pro forma income tax expense, as set
forth in the accompanying 1995 statement of operations, reflects
what the income tax expense of the Company would have been for the
year ended December 31, 1995 if none of the entities included in the
combined financial statements had operated as S corporations during
such year.

(j) USE OF ESTIMATES
The preparation of financial statements in accordance with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(3) FRANCHISE REVENUES
Franchise revenues for the years ended December 31, 1995, 1994 and 1993
consist of the following:

1995 1994 1993
---- ---- ----

Initial and development fees $ 250,500 108,000 21,000
Royalty revenue 233,800 60,704 1,677
--------- ------- -------
Total $484,300 168,70 422,677
--------- ------- -------
--------- ------- -------

The associated franchise receivables included within accounts receivable in
the accompanying balance sheets at December 31, 1995 and 1994 are as
follows:

1995 1994
---- ----

Initial and development fee receivables $ 106,416 104,000
Royalty receivables 46,437 10,492
Less allowance for doubtful accounts (15,000) -
-------- -------
$ 137,853 114,492
-------- -------
-------- -------

(4) DEFERRED COSTS
Deferred costs as of December 31, 1995 and 1994 include the following:

1995 1994
---- ----
Preopening costs $ 60,445 -
Deferred franchise costs 16,655 6,428
-------- -------

Total deferred costs $ 77,100 6,428
-------- -------
-------- -------

(5) PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment and accumulated depreciation as
of December 31, 1995 and 1994 is as follows:

1995 1994
---- ----
Buildings $ 30,292 30,292
Equipment 1,354,649 781,741
Leasehold improvements 453,863 173,824
-------- -------
1,838,804 985,857
Less accumulated depreciation (582,650) (431,517)
-------- -------

Net property, plant and equipment $ 1,256,154 554,340
-------- -------
-------- -------

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(6) LEASES
The Company leases several restaurant facilities under noncancelable
operating leases. These leases generally contain renewal options for
periods ranging from 3 to 15 years and require the Company to pay
executory costs such as maintenance and insurance. Rent expense for
operating leases aggregated $296,950, $193,418 and $126,614 for the years
ended December 31, 1995, 1994 and 1993, respectively.

Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year as of December 31,
1995 are:

Year ending December 31:
1996 $ 305,200
1997 255,875
1998 222,447
1999 201,662
2000 100,592
Thereafter 119,697
---------

Total minimum lease payments $ 1,205,473
---------
---------

The Company is party to certain operating leases with companies that are
owned by certain stockholders of the Company. Rent expense paid to these
related companies pursuant to lease agreements aggregated $63,249 and
$14,100 in 1995 and 1994, respectively.

Deferred credits in the accompanying balance sheets represent accruals for
escalating rental payments on operating leases.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(7) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:

1995 1994
---- ----
<S> <C> <C>

Prime rate plus 1% note payable to bank (9.5%
at December 31, 1995) due in monthly
installments of $57,800 including interest
with the remaining balance due in December
2000. Secured by substantially all tangi-
ble and intangible assets of the Company
and guaranteed by certain Company stock-
holders $ 2,750,000 -
Prime rate plus .5% note payable to bank
(9.0% at December 31, 1995) due in monthly
installments of $8,110 including interest
beginning in April 1996 with the remaining
balance due in March 2003. Secured by
substantially all tangible and intangible
assets of the Company and guaranteed by
certain Company stockholders 500,000 -
4% contingently convertible subordinated
debenture payable in annual installments of
$28,750 plus interest beginning in December
1996. The debenture may be converted at
the option of the debenture holder into
shares of common stock equal to a maximum
.69% of the Company's outstanding common
stock but the conversion privilege is only
operative in the event the Company has
completed an initial public offering of its
common stock which meets certain specified
criteria. The debenture is subordinate to
all other liabilities of the Company (note
12) 115,000 -
Various notes payable with a bank due in
monthly installments through October 2001
with interest rates ranging from 8.0% to
10.875%; secured by equipment. Notes were
refinanced as part of the $2,750,000 note
payable to bank discussed above - 264,527
8% note payable to a bank due in monthly
installments through 2001; secured by
equipment. The note was fully paid-off
in 1995 - 27,115
---------- -------
Total long-term debt 3,365,000 291,642

Less current installments of long-term debt (519,936) (58,700)
---------- -------
Long-term debt, less current installments $ 2,845,064 232,942
---------- -------
---------- -------

</TABLE>

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(7) LONG-TERM DEBT, CONTINUED
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1995 are as follows: 1996 - $519,936; 1997 -
$582,364; 1998 - $637,154; 1999 - $697,365; 2000 - $731,357; and
thereafter $196,824.

(8) DUE TO STOCKHOLDERS
Amounts due to stockholders represent funds advanced to the Company from
stockholders of the five restaurant entities which were used primarily
for equipment additions. Such amounts were non-interest-bearing and
were either repaid in 1995 or included in the transfer to stockholders
described in note 10.

(9) INCOME TAXES
Income tax expense (benefit) for the years ended December 31, 1995, 1994
and 1993 consists of the following:

1995 1994 1993
------- ------- ------

Current $ 9,805 - 3,666
Deferred (3,116) (2,498) 5,614
----- ----- -----
Total $ 6,689 (2,498) 9,280
----- ----- -----
----- ----- -----

As described in note 2, certain entities included in the combined financial
statements elected S corporation status as of January 1, 1994, and as a
result no longer pay corporate income taxes. Additionally, as a result
of the Merger discussed in note 1, the combined Company is an S
corporation effective December 31, 1995 and, accordingly, no deferred
tax assets or liabilities are recorded in the accompanying 1995 combined
balance sheet. Consequently, income tax expense (benefit) for the years
ended December 31, 1995 and 1994 include the reversal of existing
deferred tax assets and liabilities for those entities which first
became S corporations in each year.

Actual income tax expense (benefit) differs from the "expected" tax expense
(benefit) computed by applying the U.S. Federal corporate tax rate of
34% to earnings before income taxes for the years ended December 31,
1995, 1994 and 1993 as follows:

1995 1994 1993
---- ---- ----

Computed expected tax expense $ 212,767 202,112 28,827
S corporation earnings allocated to
stockholders (195,515) (193,589) -
Surtax exemption (7,613) (6,488) (16,199)
Change in valuation allowance (9,736) (5,303) (6,596)
Other 6,786 770 3,248
------- ------- -----

$ 6,689 (2,498) 9,280
------- ------- -----
------- ------- -----

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(9) INCOME TAXES, CONTINUED
Income taxes receivable of $16,747 and $1,300 at December 31, 1995 and
1994, respectively, are included in the accompanying balance sheets as a
component of other current assets. A net deferred tax asset of $1,670
was included in other current assets at December 31, 1994.

The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at December 31, 1994 are presented below:

Deferred tax assets:
Net operating loss carryforward $ 8,867
Accrued liabilities, due to accrual for
financial reporting purposes 2,539
------
Total gross deferred tax assets 11,406
Less valuation allowance 9,736
------
Net deferred tax asset 1,670

Deferred tax liabilities:
Property, plant and equipment, due to
accelerated depreciation for tax
reporting purposes 4,786
------
Net deferred tax liability $ (3,116)
------
------

(10) STOCKHOLDERS' EQUITY
CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS TO STOCKHOLDERS
In July 1994, pursuant to a contract for sale of stock (the contract) of
New York Bagel Enterprises, Inc. (NYBE), the then existing stockholders
(sellers) of NYBE sold a 50% ownership interest in NYBE to certain
individuals (buyers) in exchange for a cash payment from the buyers
directly to the sellers and a $50,000 contribution by the buyers to NYBE
of which $49,250 has been recorded as contributed capital and $750 has
been applied as payment of amounts owed to NYBE by the sellers. The
remaining $1,000 of capital contribution in 1994 was a cash contribution
to one of the five restaurant entities. Pursuant to the contract, NYBE
is obligated to pay to the sellers (as distributions) collections of
franchise fees NYBE receives subsequent to closing of the contract for
certain specified locations. To the extent such fees have been
recognized as income but have not yet been distributed to the sellers,
such amounts are recorded as distributions payable in the accompanying
balance sheets.

Distributions to stockholders for the years ended December 31, 1995 and
1994 are comprised of the following:

1995 1994
---- ----

Distributions of NYBE $ 963,923 132,000
Distributions of the five restaurant
entities 1,399,107 482,260
--------- -------
Total distributions $ 2,363,030 614,260
--------- -------
--------- -------

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(10) STOCKHOLDERS' EQUITY, CONTINUED
CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS TO STOCKHOLDERS, CONTINUED
As disclosed in note 2(g), distributions of the five restaurant entities
include two transfers to certain stockholders in 1994 of real estate net
of related indebtedness and the transfer in 1995, prior to the Merger,
of certain assets and liabilities (primarily restaurant related current
assets and liabilities) to the stockholders of the five restaurant
entities.

CLASS B COMMON STOCK
The Class B common stock has no voting power. Class A common stock has
full voting power. The Class B common stock will be converted into
Class A common stock on a one-for-one basis upon completion of the
Offering of the Class A common stock.

(11) FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION
The carrying values of the Company's long-term debt approximates their fair
values based on current interest rates of similar instruments. The
carrying values of the Company's other financial instruments at December
31, 1995, including cash, accounts receivable, other current assets,
accounts payable, and accrued expenses approximate their fair values
because of their short maturity.

(12) ACQUISITIONS
Effective December 14, 1995, the Company purchased all the outstanding
common stock of Nashville Bagel Company for $565,000. Acquisition
expenses amounted to $23,338. The acquisition has been accounted for by
the purchase method of accounting and, accordingly, the operations of
Nashville Bagel Company have been included in the accompanying
statements of operations subsequent to December 14, 1995. The purchase
price has been allocated to the assets and liabilities acquired based on
their estimated fair values at date of acquisition. Goodwill arising
from the acquisition amounted to $434,451.

Effective December 31, 1995, the Company purchased certain assets of
Central & Ridge Yogurt, Inc. by assuming liabilities amounting to
$225,000. The acquisition has been accounted for by the purchase method
of accounting. The purchase price has been allocated to the net assets
acquired based on their estimated fair values at date of acquisition.
Goodwill arising from the acquisition amounted to $24,600. A Company
officer was also an officer and stockholder of Central & Ridge Yogurt,
Inc.

(13) COMMITMENTS AND CONTINGENCIES
Pursuant to the terms of one operating lease, the Company has guaranteed
the performance under a lease agreement of an unrelated lessee. As of
December 31, 1995, future lease payments guaranteed aggregated $54,000;
however, the lessee is current on lease payments and the Company does
not currently expect to incur any loss applicable to this guarantee.

As of December 31, 1995, the Company has issued a guaranty totaling $35,000
on a borrowing by a franchisee. The Company monitors the financial
performance of such franchisee and the Company does not believe an
accrual is necessary for the Company's obligation under this guaranty.

<PAGE>

NEW YORK BAGEL ENTERPRISES, INC.

Notes to Combined Financial Statements, Continued

(14) SUBSEQUENT EVENT
STOCK SPLIT
On June 4, 1996, the Company effected a 1.4 for 1 stock split. The stock
split has been reflected in the accompanying financial statements and,
accordingly, all applicable dollar and share amounts have been restated
to reflect the stock split.

STOCK AWARDS
On January 16, 1996, the Company adopted the 1996 Incentive Plan (the Plan)
which authorizes the award of 400,000 shares of common stock pursuant to
incentive stock options, nonqualified stock options or restricted stock.
As of June 4, 1996, options to purchase 271,000 shares of common stock
have been granted pursuant to the Plan. The exercise price per share is
equal to 100% of the price per share of common stock to be issued
pursuant to the Offering for options pertaining to 193,500 shares and is
equal to 110% of such price per share for options pertaining to 77,500
shares. One-fifth of the options will become exercisable six months
after date of grant and one-fifth on each of the first four
anniversaries of the date of grant.

<PAGE>

LEASE AGREEMENT

This lease is entered into this ___ 1st ___ day of June, 1994, by and
between Bagel Land, Inc., an Oklahoma corporation, hereinafter called LESSOR,
and Bagels of Norman, Inc., hereinafter called LESSEE.

1. LEASED PREMISES. The Lessor hereby agrees to lease to and does lease
to the Lessee, who hereby agree to lease from and do lease from the Lessor, the
following described real estate, located in the City of Norman, Cleveland
County, Oklahoma, to wit:

1150 West Lindsey, Norman, OK 73072

2. TERM. This lease shall commence on the 1st day of July, 1994, and
continue in force for a period of five years or until July 30th, 1999. The
Lessee will have an option to renew said lease for a term of five (5) years
commencing on August 1st, 1999, and terminating June 30, 2004. If the lessee
desire to exercise the option, such notice of exercising option shall be given
to Lessor in writing sixty (60) says prior to the commencement of such option
period.

3. RENT. The amount of rent that shall be paid
during the period of this Lease Agreement shall be as follows:

3.1 For the period of July 1st, 1994, through June 30th, 1999, the
amount of $145,500 rent shall be payable at $2,350 per month for months 1-30 and
$2,500 for months 31-60 and said payment shall be delivered to lessor on or
before the 1st of each month. In the event such rental payment is not delivered
to lessor within 10 days of the due date (1st day of each month) and additional
sum of $50.00 shall be due and owing lessor for such rental period.

3.2 The rent for the option pending shall be $2,650 for months 61-90
and $2,800 for months 91-120 for a total of $163,500.

LESSOR
------------------------
LESSEE
------------------------
LESSEE
------------------------

PAGE 1 of 6

<PAGE>

3.3 In addition to the late payment fee set forth in the prior
paragraph all rent which is not received by Lessor within ten (10) days after
such rent is due and payable shall accrue interest at the rate of 1 1/2% per
month from the date when due until paid. Any accrual of interest shall not
prejudice any of the remedies available to the Lessor hereunder or under the
law.

4. MAINTENANCE OBLIGATION. The Lessor will maintain the roof of said
building at its expense and that the remainder of the building is to be
maintained at the cost of the Lessees.

5. INSURANCE OBLIGATION. The Lessor is to maintain fire and other hazard
insurance at her expense and that the Lessees are to maintain liability
insurance upon the premises for the protection of the Lessor and Lessees.

6. USE OF PREMISES. Any repairs which are necessitated by reason of the
negligence or willful misconduct of Lessees, their agents, employees or
invitees, shall be made at the sole cost and expense of Lessees.

7. ALTERATIONS. Lessees shall make no alterations, additions, or
improvements to the lease premises without the prior written consent of the
Lessor, but such consent shall not be unreasonably withheld.

8. RULES AND REGULATIONS. Lessor reserves the right to make such
reasonable rules and regulations as Lessor may deem necessary to preserve the
safety, cleanliness, and efficient operation of the building, which rules and
regulation shall be considered a part of this Lease Agreement after written
notice thereof is given Lessees.

LESSOR
------------------------
LESSEE
------------------------
LESSEE
------------------------

PAGE 2 of 6

<PAGE>

9. HOLDING OVER. In the event Lessees remain in possession of the leased
premises, or any part thereof, after the expiration of the term of this Lease
Agreement, Lessees shall be deemed to be occupying the leased premises from
month to month, otherwise subject to all conditions, provisions and obligations
of this Lease Agreement, except that during such period the rental payable for
the leased premises shall be the highest rent paid by Lessees per month to
Lessor under the agreement herein.

10. RISK OF LOSS TO LESSOR'S PROPERTY. The Lessees assume all risk of
damage to any property which is placed in or on the leased premises by Lessees
and shall hold harmless the Lessor for any claim upon the same.

11. AWARDS. Any award or proceeds resulting from the condemnation, or
sale in lieu thereof, of the whole or any part of the leased premises, shall
belong solely to the Lessor, except for awards allowed for Lessees' leasehold
improvements and relocation costs.

12. LESSOR'S LIEN. All property, goods, fixtures, and
equipment and all other personal property of Lessees which may at any time
during the term of this Lease be placed in or on the leased premises, whether
exempt from execution or not, shall be subject to a lien for the payment of the
rent and additional rent of this Lease herein reserved to the Lessor, for any
damages arising from any default or breach by the Lessees of any of the terms,
conditions, covenants and agreements of this Lease, and for all other sums due
Lessor hereunder. Upon Lessees' breach of any of their obligations contained
herein, Lessor may take possession of such personal property, or any part or
parts thereof, and sell or cause the same to be sold at a public or private
sale, with or without notice, at Lessor's option, and apply the proceeds of said
sale toward the cost thereof and toward all debts or damages due Lessor, with
the remainder, if any, to be returned to the Lessees.

13. MECHANIC'S AND MATERIALMEN'S LIENS. If any mechanic's or
materialmen's liens shall at any time be filed against the leased premises, or
any part thereof, by reason of any work, labor, services, materials, or
equipment furnished to or for Lessees, the Lessees, within 30 days after notice
of the filing thereof, shall cause the same to be discharged of record. Nothing
herein shall be deemed or construed in any way as

LESSOR
------------------------
LESSEE
------------------------
LESSEE
------------------------

PAGE 3 of 6

<PAGE>

constituting the consent of the request of Lessor, express or implied, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any improvement, alteration or
repair of the leased premises or any part thereof, nor as giving the Lessees
any right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the
filing of any lien against the leased premises or any part thereof.

14. COSTS AND FEES. Lessees agree to pay all costs and attorney's fees
incurred by Lessor in enforcing any of the obligations of Lessees under this
Lease or enforcing any of the rights of Lessor hereunder.

15. PERFORMANCE BY LESSOR. In the event Lessees shall fail to pay any
obligations for which they are responsible hereunder, Lessor may, without
prejudice to any other remedies which may be available to her, pay such charge
or claim. In the event Lessor pays such charge or claim pursuant to this
provision, it shall be immediately reimbursed by Lessor. Any sums for which
Lessor is not reimbursed within ten (10) days of its presentation of a statement
therefor to Lessees shall accrue interest at the rate of 1 1/2% per month until
paid.

16. NOTICES. All notices, requests, demands, instructions, or other
communications called for hereunder or contemplated hereby shall be in writing
and shall be deemed to have been given if personally delivered in return for a
receipt or mailed first class, postage prepaid, by registered or certified mail,
return receipt requested, to the parties at the address set forth below.
Any party may change the address to which notices are given hereunder by giving
notice in the manner herein provided.

17. RECORDING. The parties hereto agree that a memorandum of this Lease
Agreement may be filed for record in the office of the County Clerk of Payne
County in lieu of recording the entire instrument. Upon request of either, the
parties agree to execute such a memorandum of this Lease agreement.

18. CONSENT TO BREACH. Any assent, express or implied, to any breach
of a covenant or condition herein contained, shall operate as such only in a
specific instance and shall not be construed as an assent or waiver of any
such covenant or condition, generally, or any subsequent breach thereof.

LESSOR
------------------------
LESSEE
------------------------
LESSEE
------------------------

PAGE 4 of 6

<PAGE>

19. BENEFIT OF AGREEMENT. It is agreed that all the terms, conditions,
covenants and obligations contained herein shall be binding upon and the
benefits shall inure to the parties and their respective successors and assigns.

20. COUNTERPARTS. This Lease Agreement may be executed in any number of
counterparts which, taken together, shall constitute one and the same
instrument.

LESSOR
------------------------
LESSEE
------------------------
LESSEE
------------------------

PAGE 5 of 6

<PAGE>

21. SECTION HEADINGS. The section headings contained in this Agreement
are for convenient reference only and shall not in any way affect the meaning or
interpretation of this Lease Agreement.

22. TRIPLE NET LEASE. Lessee responsible for all property taxes and
insurance on building.

Bagel Land, Inc.

/s/ Robert J. Geresi
-------------------------------
Robert J. Geresi, Pres.

STATE OF ___________)
) SS
COUNTY OF __________)

The foregoing instrument was acknowledged before me this ____ day of
________, _____, by Robert J. Geresi.

My Commission Expires: ________________________
Notary Public

LESSEE:

/s/ Paul Sorrentino
- -------------------------------------
Paul Sorrentino for Bagel of Norman, Inc.

STATE OF OKLAHOMA )
) SS
COUNTY OF PAYNE )

The foregoing instrument was acknowledged before me this ____ day of
_________, ______, by Paul Sorrentino.

My Commission Expires: _______________________
Notary Public
_______________________

PAGE 6 of 6

<PAGE>
LEASE AGREEMENT

This lease is entered into this ___ 1st ___ day of December, 1993, by and
between Cherry Street Land, an Oklahoma corporation, hereinafter called LESSOR,
and Bagel Boss, Inc., hereinafter called LESSEE.

1520 East 15th Street, Tulsa, OK 74114

2. TERM. This lease shall commence on the 1st day of Jan., 1995, and
continue in force for a period of five years or until December 31st, 1998. The
Lessee will have an option to renew said lease for a term of five (5) years
commencing on January 1st, 1999, and terminating December 31st, 2003. If the
lessee desire to exercise the option, such notice of exercising option shall be
given to Lessor in writing sixty (60) days prior to the commencement of such
option period.

3. RENT. The amount of rent that shall be paid
during the period of this Lease Agreement shall be as follows:

3.1 For the period of January 1st, 1995, through December 31st, 1999,
the amount of $145,200 rent shall be payable at $2,300 per month for months 1-24
and $2,500 for months 25-60 and said payment shall be delivered to lessor on or
before the 1st of each month. In the event such rental payment is not delivered
to lessor within 10 days of the due date (1st day of each month) and additional
sum of $50.00 shall be due and owing lessor for such rental period.

3.2 The rent for the option pending shall be $2,700 for months 61-90
and $2,900 for months 91-120 for a total of $168,000.

Per discussion with Rob Garesi LESSOR
leased term commences on 1/1/95* --------------------------
and the above dates are incorrect.
As bldg. was owned all of '94 and LESSEE
offered as of 12/29/94 and the fact --------------------------
Cherry Street Land is owned by the LESSEE
same owners as Bagel Boss, term --------------------------
commencement of 1/1/95 is reasonable.
* and runs for 5 years thru 1999.

PAGE 1 of 6

<PAGE>

4. MAINTENANCE OBLIGATION. The Lessor will maintain the roof of said
building at its expense and that the remainder of the building is to be
maintained at the cost of the Lessees.

8. RULES AND REGULATIONS. Lessor reserves the right to make such
reasonable rules and regulations as Lessor may deem necessary to preserve the
safety, cleanliness, and efficient operation of the building, which rule and
regulation shall be considered a part of this Lease agreement after written
notice thereof is given Lessees.

LESSOR
-------------------------

LESSEE
-------------------------
LESSEE
---------------------------

PAGE 2 of 6

<PAGE>

12. LESSOR'S LIEN. All property, goods, fixtures, and
equipment and all other personal property of Lessees which may at any time
during the term of this Lease be placed in or on the leased premises, whether
exempt from execution or not, shall be subject to a lien for the payment of the
rent and additional rent of this Lease herein reserved to the Lessor, for any
damages arising from any default or breach by the Lessees of any of the terms,
conditions, covenants and agreements of this Lease, and for all other sums due
Lessor hereunder. Upon Lessees breach of any of their obligations contained
herein, Lessor may take possession of such personal property, or any part or
parts thereof, and sell or cause the same to be sold at a public or private
sale, with or without notice, at Lessor's option, and apply the proceeds of said
sale toward the cost thereof and toward all debts or damages due Lessor, with
the remainder, if any, to be returned to the Lessees.

LESSOR
-------------------------

LESSEE
-------------------------
LESSEE
---------------------------

PAGE 3 of 6

<PAGE>

constituting the consent of the request of Lessor, express or implied, to any
contractor, subcontractor, laborer or materialman for the performance of any
labor or the furnishing of any materials for any improvement, alteration or
repair of the leased premises or any part thereof, nor as giving the Lessees any
right, power, or authority to contract for or permit the rendering of any
services or the furnishing of any materials that would give rise to the filing
of any lien against the leased premises or any part thereof.

LESSOR
-------------------------

LESSEE
-------------------------
LESSEE
---------------------------

PAGE 4 of 6

<PAGE>

20. COUNTERPARTS. This Lease agreement may be executed in any number of
counterparts which, taken together, shall constitute one and the same
instrument.

LESSOR
-------------------------

LESSEE
-------------------------
LESSEE
---------------------------

PAGE 5 of 6

<PAGE>

21. SECTION HEADINGS. The section headings contained in this Agreement
are for convenient reference only and shall not in any way affect the meaning or
interpretation of this Lease Agreement.

22. TRIPLE NET LEASE. Lessee responsible for all property taxes and
insurance on building.

Cherry Street Land, Corp

/s/ Robert J. Geresi
-------------------------------
Robert J. Geresi, Pres.

STATE OF ___________)
) SS
COUNTY OF __________)

The foregoing instrument was acknowledged before me this ____ day of
________, _____, by Robert J. Geresi.

My Commission Expires: ________________________________________________
Notary Public
________________________

LESSEE:

/s/ Paul Sorrentino
- ------------------------------------
Paul Sorrentino for Bagel Boss, Inc.

STATE OF OKLAHOMA )
) SS
COUNTY OF PAYNE )

The foregoing instrument was acknowledged before me this ____ day of
_________, ______, by Paul Sorrentino.

My Commission Expires: ________________________________________________
Notary Public
________________________

Page 6 of 6

<PAGE>

SUBLEASE

THIS SUBLEASE, made and entered into effective the 1st day of April, 1996,
by and between Murfin Drilling Company, as "Sublessor," and New York Bagel
Enterprises, Inc., as "Sublessee."

W I T N E S S E T H: That:

WHEREAS, effective as of January 1, 1996, a contract captioned "IMA Plaza
Building Lease Agreement" (hereinafter the "Lease") was entered into by and
between IMA Plaza, as "Landlord," and Murfin Drilling Company, as "Tenant,"
pursuant to which Murfin Drilling Company leased certain office space on the 3rd
and 4th floors of the IMA Plaza Building, 250 North Water, Wichita, Kansas, a
copy of which Lease is attached hereto as Exhibit "A"; and

WHEREAS, Sublessor desires to sublease a portion of such property to
Sublessee, and Sublessee desires to rent such property on the terms and
conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the promises and covenants contained
herein, and other good and valuable consideration, the parties agree as follows:

1. SUBLEASE. Sublessor hereby subleases to Sublessee, and Sublessee
hereby subleases from Sublessor, that portion of the demised premises described
as follows:

Two office suites on the 4th Floor of the IMA Plaza Building
containing 1,204 square feet.

The subleased area is shown on the floor plan which is attached hereto as
Exhibit "B."

2. TERM. The term of the Sublease shall commence April 1, 1996, and end
March 31, 1997. Notwithstanding the foregoing, Sublessee shall have the option
to terminate this Sublease at any time upon thirty (30) days advance written
notice to Sublessor.

-1-

<PAGE>

3. BASE RENT. Sublessee shall pay to Sublessor base rental for the
premises of $14,448 for the term of this Sublease. Said base rent shall be
payable to Sublessor by Sublessee in monthly installments of $1,204, in advance
commencing on the 1st day of April, 1996, and continuing on the 1st day of each
succeeding calendar month thereafter during the term of this Sublease.

4. LEASE BINDING. Sublessee shall perform all of the covenants and
conditions contained in the Lease to be performed by the lessee under the Lease
as they apply to the subleased premises, with the exception of the following:

a. Sublessee shall have no obligation to pay all or any portion of
the real estate taxes and assessments, general and special, on the leased
premises.

b. Sublessee shall have no obligation to make any repairs to the
leased premises, except for the obligation to repair any damage caused by
any negligent or willful act of Sublessee, or Sublessee's agents or
employees.

c. Sublessee shall have no obligation to carry hazard insurance on
the leased premises, or to pay any portion of any premium for hazard
insurance on the leased premises.

5. DEFAULT. In the event of a default by Sublessee under the terms of
this Sublease, the default provisions of the Lease shall apply to this Sublease
as if the Sublessor were the Landlord under the Lease and the Sublessee were the
Tenant under the Lease.

6. ASSIGNMENT PROHIBITED. Sublessee may not assign its interest in this
Sublease, or further sublet the subleased premises, without the prior written
consent of Sublessor and the Landlord under the Lease.

7. BINDING EFFECT. This Sublease shall be binding upon, and inure to
the benefit of, the parties hereto and their respective successors, trustees,
and permitted assigns.

-2-

<PAGE>

8. ENTIRE AGREEMENT. This Sublease contains the entire agreement of the
parties with respect to the subject matter hereof, and may not be amended or
modified except in writing signed by the parties hereto.

IN WITNESS WHEREOF, this Sublease has been executed as of the date first
above written.

Murfin Drilling Company

By /s/ Robert Young TREAS.
----------------------------------
"Sublessor"

New York Bagel Enterprises, Inc.

By /s/ Paul R. Hoover V.P.
----------------------------------
"Sublessee"

CONSENT

The undersigned, the Landlord under the Lease attached hereto as Exhibit
"A," hereby consents to the Sublease as set forth above.

IMA Plaza, a partnership

By /s/ Robert Young
----------------------------------
BLDG. MGR.

-3-

<PAGE>

EXHIBIT 10.14

-----------------
DATE OF AGREEMENT
-----------------
LOAN AGREEMENT 07/08/96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- -------------------------------------------------------------------------------
New York Bagel Enterprises, Inc. STILLWATER NATIONAL BANK
AND TRUST COMPANY
250 N. Water, Suite 300 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- -------------------------------------------------------------------------------

The undersigned Borrower with principal office, place of record keeping and
mailing address as shown above, hereby acknowledges receipt of proceeds, or
some part thereof, or renewal thereof, of the following described loan and/or
extension of credit from the Lender named in this Agreement;

Loan #33319 dated 07/08/96 in the amount of 125,000.00 with a maturity of
10/08/01.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or
any part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:

Monthly Financial Statements and Accounts Receivable (Royalty
fees) beginning 6/30/96 (allow 45 days to receive).

Annual Corporate Tax Return and Audited Financial Statement
beginning 12/31/95 (by 8/15/96).

Annual Statement of Cash Flows an Projected Balance Sheet &
Income Statement (for 1997 to be received by 4/15/97)

Annual Financial Statements and Tax Returns from Guarantors.

F. Accounting Records. To maintain adequate records in accordance with
generally accepted accounting principles of all transactions so that
at any time and from time to time the true and complete financial
condition of the Borrower may be readily determined.

STILLWATER NATIONAL BANK /s/ Robert Geresi
AND TRUST COMPANY ------------------------------------
P.O. Box 1988 - 608 S. Main By: Robert Geresi, President
Stillwater, OK 74074 /s/ Paul Hoover
------------------------------------
By: Paul Hoover, Vice President
/s/ J. Chris Dennis
------------------------------------
By: J. Chris Dennis, Secy/Treas/CFO
- -------------------------------------------------------------------------------
By: /s/ Ruth E. Walker
----------------------------- ------------------------------------
Ruth E. Walker, Sr. VP
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Form 04 0758 2 (10/95) ORIGINAL -c- Copyright 6/92 AMERICAN BANK SYSYEMS

<PAGE>

EXHIBIT 10.15

Loan #33321 dated 07/08/96 in the amount of $172,500.00 with a maturity of
07/08/01.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or
any part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:

Monthly Financial Statements and Accounts Receivable (Royalty
fees) beginning 6/30/96 (allow 45 days to receive).

Annual Corporate Tax Return and Audited Financial Statement
beginning 12/31/95 (by 8/15/96).

Annual Statement of Cash Flows an Projected Balance Sheet &
Income Statement (for 1997 to be received by 4/15/97)

Annual Financial Statements and Tax Returns from Guarantors.

<PAGE>

EXHIBIT 10.16

-----------------
DATE OF AGREEMENT
-----------------
LOAN AGREEMENT 07/10/96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- -------------------------------------------------------------------------------
New York Bagel Enterprises, Inc. STILLWATER NATIONAL BANK
AND TRUST COMPANY
250 N. Water, Suite 300 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- -------------------------------------------------------------------------------

Loan #33320 dated 07/10/96 in the amount of $300,000.00 with a maturity of
01/10/07.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or
any part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:

Monthly Financial Statements and Accounts Receivable (Royalty
fees) beginning 6/30/96 (allow 45 days to receive).

Annual Corporate Tax Return and Audited Financial Statement
beginning 12/31/95 (by 8/15/96).

Annual Statement of Cash Flows an Projected Balance Sheet &
Income Statement (for 1997 to be received by 4/15/97)

Annual Financial Statements and Tax Returns from Guarantors.

<PAGE>

EXHIBIT 10.17

-----------------
DATE OF AGREEMENT
-----------------
LOAN AGREEMENT 07/15/96
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BORROWER NAME AND ADDRESS LENDER NAME AND ADDRESS
- -------------------------------------------------------------------------------
New York Bagel Enterprises, Inc. STILLWATER NATIONAL BANK
AND TRUST COMPANY
250 N. Water, Suite 300 P.O. Box 1988 - 608 S. Main
Wichita, KS 67202 Stillwater, OK 74074
- -------------------------------------------------------------------------------

Loan #33322 dated 07/15/96 in the amount of $150,000.00 with a maturity
of 10/15/03.

IN CONSIDERATION of Lender making such loan and/or extension of credit, or
any part thereof, Borrower agrees as follows:

A. FINANCIAL INFORMATION. To deliver to Lender within the stated time
limits the following financial information and income tax returns as
of the dates and for the period indicated:

Monthly Financial Statements and Accounts Receivable (Royalty
fees) beginning 6/30/96 (allow 45 days to receive).

Annual Corporate Tax Return and Audited Financial Statement
beginning 12/31/95 (by 8/15/96).

Annual Statement of Cash Flows an Projected Balance Sheet &
Income Statement (for 1997 to be received by 4/15/97)

Annual Financial Statements and Tax Returns from Guarantors.

<PAGE>
EXHIBIT 23.1

CONSENT OF KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.

The Board of Directors
New York Bagel Enterprises, Inc.

We hereby consent to the use in this Registration Statement on Form S-1 of
the references made to our firm herein, in particular to the section captioned
"Legal Matters."

/s/ Klenda, Mitchell, Austerman & Zuercher, L.L.C.

Wichita, Kansas
July 26, 1996

<PAGE>
EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
New York Bagel Enterprises, Inc.:

We consent to the use of our reports relating to the combined balance sheets
of New York Bagel Enterprises, Inc. as of December 31, 1994 and 1995, and the
related combined statements of operations, stockholders' equity (deficit), and
cash flows for each of the years in the three-year period ended December 31,
1995, the statements of operations, stockholder's equity and cash flows of
Nashville Bagel Co., Inc. for each of the years in the three-year period ended
June 30, 1995 and for the period from July 1, 1995 through December 14, 1995,
and the statements of operations, stockholders' deficit, and cash flows of
Central & Ridge Yogurt, Inc. for the year ended December 31, 1995, included
herein and to the references to our firm under the headings "Selected Combined
Financial Data" and "Experts" in the prospectus.

Our report relating to our audits of Nashville Bagel Co., Inc. refers to a
change in the method of accounting for income taxes in 1994.

/s/ KPMG PEAT MARWICK LLP

KPMG Peat Marwick LLP

Wichita, Kansas
July 26, 1996